Why Selling Is Harder Than Buying
Buying is the beginning of hope. Selling is its end.
Investing teaches you a lot about yourself.
It took me a long time to realize that my success as an investor was hurt more by my hopes and fears than helped by how well I did my investing homework. Hopes can override strategies.
It was almost self-evident when I thought of it: at the start of an investment (or a new project, endeavor, whatever), I am full of hope. In fact, if I’m building something, the earliest part of the project is often the most fun and exciting - there’s a lot to look forward to. In the same way, a new investment promises rewards and growth: why the heck would I invest in it if that wasn’t so? Hope abounds.
Then the waiting begins. Maybe the price goes up, and this makes me happy: it confirms my thesis. But maybe the price goes down. This makes me doubt myself, but abandoning hope is a very, very difficult thing: subconsciously, I know that hope ends when I sell. But should my decisions be a slave to my hopes? Nope.
Let’s admit this: hope is essential. It’s what drives us forward, keeps us optimistic, and helps us persevere.
That said, here’s how hope can push you into a trade:
- You hear about an exciting stock - a hot tip. Your hopes shoot up, and you jump in with no homework. FOMO and hope: probably not a good idea.
- You do your homework, and you’re convinced it’s a great investment. Rather than waiting for a good price, your hopes overcome your patience, and you jump in: you might have invested in a good company at a bad price.
Your hope speeds your entry into an investment.
And on selling, hope has the opposite effect - inertia:
- Say that your stock’s fundamentals decline. This should make you reassess, but your hope is strong. You don’t sell because it’s easier to hold on to that hope.
- Maybe your stock goes down in price. Rather than execute on a planned stop-loss, you have a feeling, a hope that it will come back. And if you sell, it’s a loss, ending the hope of an exciting investment. A stock down 20% needs a 25% gain to get back to even. Down 50%, it needs 100%. Hope tends to show up somewhere between those two numbers.
Fear does the same damage on the other side. A stock rises, your thesis is working, the fundamentals are intact - and you sell anyway, not because anything about the company changed, but because the gain has started to feel like yours to lose. So you bank a small, prudent-feeling win, and fear makes an exit decision that your rule was supposed to make.
Behavioral finance has a name for this: the disposition effect - investors tend to sell winners too early and hold losers too long (Shefrin & Statman, 1985). Hope and fear pull in opposite directions, but the fix is the same: a rule you choose in advance.
A strategy is stock selection plus buy and sell rules - all decided before you buy the first share. That timing is the point: you set your exit while hope is high and nothing is at stake yet, not after the stock has fallen and hope is all you have left.
It also helps to remember that no single investment is “The One.” That’s where hope lives and where your strategy dies. The market presents new opportunities all the time; selling one stock doesn’t end your hope, it frees it up for the next.
Stockyard was built for exactly this. Smartfolios generate buy and sell signals from the rules you set, processing earnings reports for over 5,000 US stocks as they’re released and checking prices every day. Your sell discipline doesn’t depend on how you feel that afternoon. See Automate Your Strategy in Five Steps with Smartfolios
Buying is the beginning of hope. Decide how it ends while you’re still thinking clearly.
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