Don’t undercut your profits by selling your top rising stocks too soon.

Attempting to sell stocks at a peak price isn’t a great idea. It sounds good in theory, sure. But in practice, it simply doesn’t work. You will most likely end up selling your top rising stocks at a bargain.

When it comes to adding value to your investing efforts, one of the least productive things you can do is to try to “time” the market. By that, we mean attempting to sell good stocks at what looks to you like a price peak, in hopes of buying them back later at lower prices.

One of the hardest things about successful investing is that it’s easy to form a strong opinion on the market’s next price trend, and then find the market does something totally different from what you expected. That’s why you want to confine your buying mostly, if not entirely, to high-quality stocks. They tend to hold on to their value over long periods.

Sometimes your strong opinions will turn out right. Other times, you’ll sell at what looks like a high price, only to find that some new information comes along that spurs the stock to much higher prices. Sometimes, you’ll sell a stock that looks “high,” then use the money to buy something else that looks cheap. But your cheap stocks get even cheaper while the rest of the market continues to rise.

You’ll often meet investors who are eager to tell you in great detail how they determined that a seemingly top rising stock, or the market as a whole, was over-priced, and how they sold just in time to avoid a 10% or 20% downturn. Avoiding a downturn feels good and makes a good anecdote, but that’s not the same as making money.

Avoid selling your top rising stocks too early

It’s all too easy to sell a stock that looks like it’s headed for a downturn, only to buy another that is headed for a collapse. For that matter, if you make a habit of selling whenever you feel the market’s risk has gone up, you will wind up selling your best stocks way too early.

You can always find a rationale for selling. Market commentators are continually thinking up new ones, based on recent market strength or weakness, historical market patterns, political or economic predictions, changes in tax policies—the list is endless. This is a good thing. After all, you can only buy a stock if somebody who owns it wants to sell.

Before you act on a selling rationale, take a broader look. Consider facts about the stock, and about your investment goals and temperament. If the selling rationale makes sense and you find additional good reasons to sell, then selling may be the right thing to do. But it’s always a bad idea to sell a good stock for trivial or transitory reasons.

When top rising stocks turn into flops

Beyond selling, it’s not always advised to buy top rising stocks, either. Little-noticed stocks sometimes rise for months before the reason for their strength becomes apparent.

If you always try to buy below the market, you’ll always get a “fill” on stocks with hidden flaws. They’ll always come down into your buying range … and they’ll keep on falling.

But you’ll never get to buy the other kind of stock—the kind that keeps going up. These stocks will always seem too expensive, and they’ll go on to get even more expensive. But you need a few of these ever-more expensive stocks to offset the losses from those that get cheaper and cheaper.

There’s no easy answer to the buy-now-or-wait dilemma on current top rising stocks. At times it may pay to hold off—for instance, a company’s stock will often rise when it announces a stock split, then fall after the split takes effect.

In the end, though, if a rising stock is truly worth investing in, you should be willing to buy it at current prices, even if that means you run the risk of having to sit through a 5% to 10% setback. Before it slips into its next 5% to 10% setback, after all, it may first go up 50% to 100%.

Have you been able to sell a stock when it was close to a peak price, and buy it back when it dropped? Have you ever sold a stock, only to see it go much higher? Do you have a plan for selling, or do you do it on impulse, or in reaction to events? Have you changed your approach to selling over the years? Let us know what you think in the comments section below.