Every Wednesday, we publish our “Investor Toolkit” investment advice series. Whether you’re a new or experienced investor, these weekly updates are designed to give you our specific advice on successful investing. Each Investor Toolkit update gives you a fundamental piece of investing advice and shows you how you can put it into practice right away.

Tip of the week: “Not all advisors are equal; pick one whose interests are aligned with yours.”

When you seek investment advice on what to do with a particular stock you should always consider the source. Most investors get their investment advice from a broker, or an investment publication.

Brokerage firms often say “hold” or “reduce” as a euphemism for “sell.” That’s because they don’t want to offend potential underwriting or corporate finance clients, who generate far more profit than individual investors. Individual brokers may be more forthright. They may say “take profits” rather than sell. But they still operate under a conflict of interest. If they say “hold” and mean it, they don’t make a dime.

We stay out of the underwriting, corporate-finance and securities-trading businesses altogether, so we don’t suffer from any of these conflicts of interest. If we think a stock’s prospects make it a sell, we say so.

Certain investment publications give stock recommendations based upon relationships with stock promoters who pay large sums to advertise their stock in glowing terms (disclosed in the fine print) and not based on independent research or fundamentals.

It should go without saying (but I’ll say it anyway) that we would never participate in anything like this. If we advise you to buy, sell or hold any stock, it’s because our research tells us that’s the right thing to do with it.

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When we give investment advice to switch our “buy” recommendations to “hold”on stocks we regularly follow, that’s exactly what we mean, we feel there are better choices for new buying, but we still like the stock’s longer-term prospects. Then too, at times we have underestimated the potential gains available from our buys. They sometimes rise much higher than we expected. So, as a rule, we advise against treating our “hold” recommendations as sells.

When you might want to sell our hold recommendations?

If you need investment advice on when to sell something from your portfolio, you are probably better offselling our holds than our buys. In addition, if you find that we see most of your stocks as holds, then it might be a good idea to trade in some of your stocks that we view as holds for others that we recommend as buys.

Note too that we might also advise you to take profits in a highly successful investment if it has risen so much that it makes up an uncomfortably high proportion of the total value of your portfolio.

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