In one of his famous “memos” released on Jan. 13, Howard Marks (Trades, Portfolio), co-chairman of multibillion-dollar asset management firm Oaktree Capital, discusses the popular investing topic of determining when to sell a stock.
The paper, titled “Selling Out,” began with Marks realizing that while he has covered nearly every relevant topic related to investing in his nearly 40 years of writing, he has never devoted an entire memo to the topic of selling out.
He then explained the common view of “buy low, sell high” is only a starting point for discussing “a very complex process.” Marks wrote:
“Will Rogers, an American film star and humorist of the 1920s and ’30s, provided what he may have thought was a more comprehensive roadmap for success in the pursuit of wealth:
‘Don’t gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don’t go up, don’t buy it.’
The illogicality of his advice makes clear how simplistic this adage – like many others – really is. However, regardless of the details, people may unquestioningly accept that they should sell appreciated investments. But how helpful is that basic concept?”
Marks then goes on to highlight the origins of the adage, what it actually means to sell when a stock is up or down and when investors actually should sell.
Read Marks’ full memo here.
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