If you’re like me, one of the things I often struggle with is the question of when to sell. The instinct to lock in gains when something is up, or to cut losses when something is down, feels natural. But as Howard Marks recently explained on The Money Maze Podcast, those impulses can be misleading.
“You shouldn’t sell things just because they’re up, because if they were a good buy in the first place, maybe they have further to go,” Marks points out.
Likewise, he warns against selling simply because an investment has declined: “If they were a good buy initially, maybe they’re better now that they’re cheaper.” The key, he suggests, is not to be reactionary but rather to be analytical.
Too often, investors fall into a binary mindset: either a stock is a buy, or it’s a sell. But Marks challenges that notion, arguing that holding is often the right choice.
“Most people who are doctrinaire or smug might say everything is either a buy or a sell, but I don’t think that’s true. There are things that you can legitimately hold.”
This is a powerful concept because it recognizes that investing is not just about entry and exit points—it’s about the journey in between.
The question, then, is how to determine when to sell. Marks’ approach is refreshingly pragmatic. Instead of reacting to price movements, he advocates for a thorough re-evaluation of the original investment thesis: “You examine your prior thesis, check if it’s still correct, see if there’s still room for appreciation under that thesis, and perhaps update it. Then you ask yourself, ‘Is this an investment I would make today?’ If the answer is absolutely not, then you probably shouldn’t hold it.”
This discipline forces investors to separate emotional reactions from rational decision-making. Just because an investment has doubled does not mean it’s time to sell—what matters is whether it remains a good bet going forward.
Marks illustrates this with a simple example: “If you bought something at $10, and it’s now $20, you update your thesis. Initially, you thought it would go to $20, but now you believe it could reach $25. You might not want to buy more for the move from $20 to $25, but you might feel confident enough in that potential gain to continue holding. In other words, there’s still some juice left in the orange.”
That final phrase captures the essence of Marks’ philosophy. Selling should not be driven by arbitrary price levels, but rather by a fresh, unbiased look at the investment’s future potential. The best investors understand that holding—when done thoughtfully—can be just as active a decision as buying or selling.
You can watch the entire interview here:
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