Q: You often advise long-term, buy-and-hold investing, and also write about bad reasons to sell stocks. What are some reasons why you would sell the stocks you own?
The main reason I'd sell a stock is if something fundamentally changes with my investment thesis. Maybe a competitor is taking away market share or pricing power. For example, one of the primary reasons I own Caterpillar is that it's the world's largest construction equipment manufacturer. If its market share started to erode, I may rethink my investment thesis. The same idea applies if a stock's dividend is a big part of why you own it, and the company cuts or eliminates its dividend payment.
There are other possible good reasons to sell stocks. An obvious one is if you need the money. If you're relying on your stocks to send your kids to college, you'll probably have to sell when the tuition bill comes.
Rebalancing is another good example. If one of your stocks went up sharply and now represents too much of your portfolio's value, selling some of it to balance things out can be a smart idea.
A takeover or merger announcement can also be grounds to sell -- when a takeover is announced, the stock of the company being acquired tends to shoot up to the buyout level, so it could be a smart idea to cash out and deploy that capital elsewhere. As a personal example, I sold my shares of Whole Foods shortly after Amazon announced it was purchasing the company.