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

Tip of the week: “The fact that the share price has gone up or down is one of the least important reasons for selling a stock.”

We consistently recommend taking the long view with stocks. However, a conservative investing strategy is not a static one: clearly not all stocks can be held indefinitely and a healthy portfolio must undergo certain necessary changes.

Bringing in good stocks will obviously invigorate your portfolio. It is just as true that some stocks that fail to perform just aren’t worth keeping. That leads many investors to ask us just when they should let go of a weak stock and replace it with something new.

On this matter our stock trading advice begins with one important tip. Look beyond the share price when you’re deciding whether you should sell. This advice applies whether a stock is going up or going down.

Invest in your Financial Future for FREE Learn everything you need to know in '9 Secrets of Successful Wealth Management' for FREE from The Successful Investor. Secrets of Successful Wealth Management: 9 steps to the life you've always wanted, before and after retirement.  I consent to receiving information from The Successful Investor via email. I understand I can unsubscribe from these updates at any time.

Investing’s impossible task—buying at the bottom and selling at the top

There is no set formula that will trigger a signal to sell a weak performer, whether your investing strategy is conservative or more aggressive. But there are some guidelines that will help you make the decision.

First, you are never going to sell at the top or buy at the bottom. This is why we are so selective about the stocks we recommend in our newsletters and wealth management services. The better the quality of the investments you buy, the less you have to lose if you decide you’re not going to sell. The chances of a rebound are much higher with a quality stock.

On the other hand, if you are going to sell, do so because you no longer believe in the quality of the stock, and not simply because the share price has declined.

Whether your approach to investing is conservative or aggressive, the quality of your investments matters much more than your skill at selling.

However, you should be quicker to sell aggressive stocks than conservative ones. With stocks we rate as “Speculative” or “Start-up,” it pays to apply our sell-half rule. That’s when you sell half of a stock that doubles in price.

Sell a rising stock and risk missing a big payoff

Many investors mistakenly assume that frequent profit-taking is the key to long-term success. Few brokers will disagree with this assumption, since they make money every time you buy or sell. But in the long run, taking profits simply because profits are available will cost you money. That’s because of the way the stock market works.

Stock prices rise 10% to 12% a year over long periods, on average, but individual cases and years vary widely. Even good stocks sometimes go sideways for decades, while others turn out to be “ten-baggers,” with gains of 1,000%.

To maximize your profits, you need to hang on to your best performers for years. If you are too quick to sell stocks that have gone up, you may avoid some 20% setbacks, but you’ll also miss out on some 200% gains.

COMMENTS PLEASE—Share your investment experience and opinions with fellow TSINetwork.ca members

Do you have a specific rule of thumb or indicator for selling stocks that are going up or down? Have you ever varied from that rule of thumb and had a pleasant surprise—or a deep disappointment? Let us know what you think.