WHEN TO SELL A STOCK? | Investing For Complete Beginners

Joyee Yang

15,100 views • 6 months ago

Video Summary

The video outlines five key strategies for beginner investors to determine when to sell their investments. These include monitoring CEO behavior for excessive political involvement, observing dividend cuts as a financial distress signal, identifying emerging competitors that threaten a company's market share, recognizing when investment funds are needed for significant life goals like purchasing property, and rebalancing a portfolio to maintain desired asset allocation. A particularly interesting insight is that while some might view dividend cuts as an early sign of financial trouble, they are often a last resort for companies.

Short Highlights

Sell when a company's CEO becomes too political or unpredictable, as their behavior can impact stock price.
A company cutting its dividend is a strong signal of financial trouble or mismanagement, often a last resort.
Be wary of emerging, innovative competitors that threaten a company's market position and relevance.
Sell investments when the money is needed for a specific, important financial goal, such as a down payment for a property.
Rebalance your portfolio periodically (every 3-6 months) to maintain your desired asset allocation, especially after significant market movements.

Key Details

CEO becomes too political or unpredictable [00:37]

Beginner investors often overlook the impact of a CEO's public behavior on a company's stock price.
When a CEO becomes overly political or engages in controversial actions, it can lead to stock price volatility, making long-term holding risky.
The video uses examples like Elon Musk and Mark Zuckerberg to illustrate how a CEO's public statements or actions can drastically affect stock value.
Content creators on platforms like Instagram, YouTube, or investment social media (e.g., Blossom) can help identify when a CEO is making headlines for the wrong reasons.
The core principle is to sell if a company's leadership becomes the main story rather than the company's growth or performance.

"So, when I start seeing too many posts or videos about a company CEO causing chaos, I take it seriously and I'll consider selling my position because I don't want my portfolio to swing around based on one person's behavior."

Company cuts its dividend [00:37]

For dividend investors, a dividend cut is a clear red flag to consider selling a stock.
Dividends represent a portion of a company's profits paid to shareholders, and a cut or suspension usually indicates financial distress.
This signal can point to shrinking revenues, reduced profitability, or poor cash flow management.
Companies typically cut dividends as a last resort, knowing investors value them.
An example cited is BCE (Bell) laying off employees before cutting its dividends.

"When a company suddenly cuts or stops paying those dividends, it usually signals to me that they're not doing so well financially."

New competition threatens the company [00:40]

The emergence of a newer, more innovative competitor can disrupt established companies, signaling a need to sell.
This disruption can be observed by paying attention to popular trends, consumer choices, and emerging technologies.
Historical examples include Amazon disrupting retail giants like Bed Bath & Beyond and Sears, and affecting Barnes & Noble.
To assess the risk, investors should ask if the company is adapting, evolving with consumer habits, and has a plan to compete.
For beginners, investing in broad market ETFs is recommended over individual stocks, especially in fast-moving sectors like tech and retail, as ETFs automatically adjust holdings.

"If you're invested in a company that's starting to look outdated or clearly getting overtaken by newer businesses with better technology or stronger branding, don't panic sell."

When you actually need the money for a real goal [00:05]

The primary purpose of investing is to build wealth that can eventually be used to improve one's life.
Selling investments to fund significant life events, such as purchasing a first property, is a valid and rewarding reason.
The speaker shares their personal experience of selling their entire portfolio at age 23 to buy a property in Ontario, which was a major financial milestone.
Having clear financial goals like buying a house, furthering education, or starting a business provides a strong rationale for selling and taking profits.

"You're not investing just to stare at green numbers on a screen. You're investing to improve your life."

When it's time to rebalance your portfolio [00:05]

Portfolio rebalancing is a traditional strategy to maintain a desired asset allocation and manage risk.
If one asset class grows significantly faster than others, it can skew the portfolio's risk profile.
Rebalancing involves selling a portion of the overperforming assets and reinvesting them into underperforming ones to restore the original balance.
This can be done based on broad asset types (e.g., ETFs vs. individual stocks) or industry/sector allocations (e.g., tech, energy, healthcare).
It's recommended to conduct a portfolio review and rebalancing every 3 to 6 months, or when market conditions shift significantly, to ensure alignment with the investing strategy.