Selling Is the Harder Half

Buying a position is one decision made once, but holding it is a decision you re-make every single day you don't sell, and only three things honestly justify actually selling.

Most people think of selling as the hard part and holding as the passive part, the default. I'd flip that. Holding is the active choice, made silently, day after day, and it deserves the same scrutiny you gave the initial purchase, not less.

The three legitimate reasons to sell

First, the thesis you bought on actually broke. Not the price moved against you, the reason you owned it stopped being true. Second, you found a clearly better use for the money, not a slightly better one, because moving capital has real costs and a marginal improvement rarely clears that bar. Third, the position grew so large relative to everything else you own that it now represents a concentration risk you didn't originally sign up for. Outside of those three, most selling is something else wearing analysis as a disguise.

When mood is doing the analysis's job

Here's the tell I watch for in myself. If I can state the reason for selling in one plain sentence about the business or the position size, it's probably real. If it takes several sentences about how I've been feeling lately, about the market, about the news, that's mood, not analysis, and mood is a bad reason to give up a position you researched carefully enough to buy in the first place.

• The thesis broke. Not the price, the underlying reason you bought.
• You found a clearly better place for the capital, not a marginally better one.
• The position outgrew its sensible share of the portfolio.

I try to hold myself to a simple test before any sale. Can I write the reason down in one sentence that would still make sense to me in six months? If yes, sell. If it takes a paragraph and half of it is about my mood, that's usually the answer telling me to leave it alone.