When to SELL?

If your money is invested in a good company that has good long-term prospects, one that grows year-on-year and offers you steady returns, there is really no reason for you to sell—regardless of the fluctuations in the stock price.

(2024 update: I would add a caveat to this general rule. Sometimes the market can be overly optimistic to the extreme. And since we know the macro market can be cyclical, it does not hurt if you wish to sell a fraction of your shares to reduce exposure and take profit, if you think the valuation has diverged greatly from the fundamentals, which you can then buy back at a later date at a lower price when the market corrects itself. However, this takes patience and is only advisable if you intend to monitor market conditions over a long period of several years).

However, sometimes things change and you might want to consider selling the shares if:

• The company's fundamentals change.
• Higher returns can be obtained by investing in another asset (taking into consideration the Capital Gains tax for selling your existing shares).

The first point being the most important reason. If the reasons that led you to buy into this company in the first place are no longer true, then it obviously makes no sense for you to continue investing in this company.