Our investing strategy is a conservative one. We consistently recommend taking the long, rather than the short, view. But clearly not all stocks can be held indefinitely. A good portfolio is never a completely static one.

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

Our stock trading advice begins with one important tip. Look beyond the share price when you’re deciding whether or not to sell.

You will never sell at the top or the bottom

There is no simple formula for deciding when to sell a weak performer, regardless of 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. The better the quality of the investments you buy, the less you have to lose if you decide to avoid selling. 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, not just because the share price has declined.

Regardless of 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.

Missing 200% gains through short-term trading

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 is going to 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 make serious 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.

You can get Canadian Wealth Advisor, with our advice on leading conservative investments and my #1 Safety-Conscious Pick for 2012 when you subscribe now. And as a new subscriber you can save $50.00 on an introductory subscription. Click here to get started right away.