When I buy an ASX share, I do so with no intention of ever selling it. This isn't because I think I'm a fantastic investor who will never make a mistake when choosing a company to buy. It's because buying shares at the right price is hard mental work, and so I don't want to have to expend even more energy making the same calculation in reverse one day.
The truth is that it's just as easy to make a mistake selling an ASX share as it is buying one. That's why I hope that when I buy a stock for my own portfolio, I will never have to worry about it again.
This attitude was partly inspired by the legendary investor Warren Buffett. Buffett once said these two things that have always stuck with me:
If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes.
Our favorite holding period is forever.
Think about the last time you sold an ASX share. What made you hit the button? Chances are it wasn't a happy reason. Perhaps you needed some money for a holiday, or a home. Or else maybe the investing thesis you had when you bought the company ended up losing its viability. Those are all legitimate reasons to sell a share.
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When shouldn't you sell an ASX share?
However, I'd wager that most share sales aren't due to reasons like those listed above. Sadly, most investors sell shares when they get spooked and scared by the markets.
You never understand what kind of emotional trauma a stock market crash can bring to your mind until you've gone through one.
On one hand, you have your cash account sitting there, blissfully stable and collecting interest. On the other, you have your share brokerage account losing money day after day and then week after week.
Of course it's tempting to 'rescue' your money and bring it from the dangerous side to the safe side. But this is almost always a terrible idea, as is almost every emotionally-driven decision on the stock market.
But don't take it from me, take it from Buffett himself. Here are another three Buffett quotes that I think sum up the dangers of panic-selling shares perfectly:
I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.
The best chance to deploy capital is when things are going down… Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.
Buy a stock the way you would buy a house. Understand and like it such that you'd be content to own it in the absence of any market.
Every time there is a market crash, Buffett, through his company Berkshire Hathaway, buys shares from people who are selling them out of fear. Don't be one of those people who make other people rich during a crash.
Selling an ASX share because you got the business wrong or when you need the money for another venture is fine. But don't sell because everyone else is and you are scared of losing money. If you've bought a high-quality company to begin with, it will be fine.
Next time there's a market crash, I'm going to try and emulate Buffett and buy even more shares of my favourite companies. Please don't sell yours to people like me when that happens.
