Should I sell when my stocks are growing?
If you feel comfortable taking an 8% gain on your stocks, then yes, you should sell. It is generally a good idea to know when you want to sell (either a price or %) before you ever actually buy the stocks. That helps from getting emotional and making poor decisions. "I reread your question. You are not asking about the validity of selling a particular stock after a bit of an increase but a group of stocks. We don't know how many.  This is the S&P for the past 12 months. Trading at 1025-1200 or so means that 80-100 points is an 8% move. I count 4 such moves during this time.  The philosophy of ""you can't go wrong taking a gain"" is tough for me to grasp as it offers no advice on when to get (back) in. Studies by firms such as Dalbar (you can google for some of their public material) show data that supports the fact that average investors lag the market by a huge amount. 20 years ending 12/31/08 the S&P returned 8.35%, investor equity returns showed 1.87%. I can only conclude that this is a result of buying high and selling low, not staying the course.  The data also leads me to believe the best advice one can give to people we meet in these circumstances is to invest in index funds, keeping your expenses low as you can. I've said this since read Jack Bogle decades ago, and this advice would have yielded about 8.25% over the 20 years, beating the average investor by far, by guaranteeing lagging the average by 10 basis points or so.  A summary of the more extensive report citing the numbers I referenced is available for down load - QAIB 2015 - Quantitative Analysis of Investor Behavior. It's quite an eye-opener and a worthy read. (The original report was dated 2009, but the link broke, so I've updated to the latest report, 2015)" It depends on what your investment goals are.  Are you investing for the short-term or the long-term?  What was your reason for investing in these stocks in the first place?  Timing short-term fluctuations in the market is very difficult, so if that's your goal, I wouldn't count on being able to sell and buy back in at exactly the right time.  Rather, I think you should think about what your investment rationale was in the first place, and whether or not that rationale still holds.  If it does, then hold on to the stocks.  If it doesn't, then sell. You should constantly look at your investment portfolio and sell based on future outlook. Don't get emotional. Selling a portfolio of stocks at once without a real reason is foolish.  If you have a stock that's up, and circumstances make you think it's going to go up further, hold it. If prospects are not so good, sell it. Also, you don't have to buy or sell everything at once. If you've made money on a stock and want to realize those gains, sell blocks as it goes up. Stay diversified, monitor your portfolio every week and keep a reserve of cash to use when opportunity strikes. If you have more stocks or funds than you can keep current on every week, you should consolidate your positions over time. There is an approach which suggests that each weekend you should review your positions as if they were stocks to be considered for purchase on Monday. I can't offer advice on picking stocks, but it's fair to say that you need to determine if the criteria you used to buy it the first time is still valid. I own a stock trading at over $300, purchased for $5. Its P/E is still reasonable as the darn E just keeps rising.  Unless your criteria is to simply grab small gains, which in my opinion is a losing strategy, an 8% move up would never be a reason to sell, in and of itself. Doing so strikes me as day trading, which I advise againgst. Try to find out (online) what 'the experts' think about your stock. Normally, there are some that advise you to sell, some to hold and some to buy. Hold on to your stock when most advise you to buy, otherwise, just sell it and get it over with. A stock's estimated value depends on a lot of things, the worst of these are human emotions... People buy with the crowd and sell on panic. Not something you should want to do.  The 'real' value of a stock depends on assets, cash-flow, backlog, benefits, dividends, etc. Also, their competitors, the market position they have, etc. So, once you have an estimate of how much the stock is 'worth', then you can buy or sell according to the market value. Beware of putting all your eggs in one basket. Look at what happened to Arthur Andersen, Lehman Brothers, Parmalat, Worldcom, Enron, etc. "In my view, it's better to sell when there's a reason to sell, rather than to cap your gains at 8%. I'm assuming you have no such criteria on the other side - i.e. hold your losses down to 8%. That's because what matters is how much you make overall in your portfolio, not how much you make per trade. Example: if you own three stocks, equal amounts - and two go up 20% but one falls 20%. If you sell your gains at 8%, and hold the loser, you have net LOST money. So when do you actually sell? You might say a ""fall of 10%"" from the last high is good enough to sell. This is called a ""trailing"" stop, which means if a stock goes from 100 to 120, I'll still hold and sell if it retraces to 108. Needless to say if it had gone from 100 to 90, I would still be out. The idea is to ride the trend for as long as you can, because trends are strong. And keep your trailing stops wide enough for it to absorb natural jiggles, because you may get stopped out of a stock that falls 4% but eventually goes up 200%. Or sell under other conditions: if the earnings show a distinct drop, or the sector falls out of favor.  Whenever you decide to sell, also consider what it would take for you to buy the stock back - increased earnings, strong prices, a product release, whatever. Because getting out might seem like a good thing, but it's just as important to not think of it as saying a stock is crappy - it might just be that you had enough of one ride. That doesn't mean you can't come back for another one." My thoughts are that if you've seen considerable growth and the profit amassed would be one that makes sense, you would have to seriously consider selling NOW because it could take yeoman's time to mimic that profit in the next 10 quarters or so.  To analogize; If you bought a house for 100k and we're renting it for say 1,000/month and we're making $ 250/month profit and could sell it now for 125k, it would take you 100 months to recoup that $25k profit (or 8 years 4 months). Doesn't it make sense to sell now? You would have that profit NOW and could invest it somewhere else without losing that period of time, and TIME is the emphasis here.
"My theory is that for every stock you buy, you should have an exit strategy and follow it.  It is too hard to let emotions rule if you let your default strategy be ""let's see what happens."" and emotional investing will almost never serve you well.  So before buying a stock, set a maximum loss and maximum gain that you will watch for on the stock, and when it hits that number sell.  At the very least, when it hits one of your numbers, consciously make a decision that you are effectively buying it again at the current price if you decide to stay in. When you do this, set a new high and low price and repeat the above strategy." "If so, then if company A never pays dividends to its shareholders, then what is the point of owning company A's stock? The stock itself can go up in price. This is not necessarily pure speculation either, the company could just reinvest the profits and grow. Since you own part of a company, your share would also increase in value. The company could also decide to start paying dividend. I think one rule of thumb is that growing companies won't pay out, since they reinvest all profit to grow even more, but very large companies like McDonalds or Microsoft who don't really have much room left to grow will pay dividends more. Surely the right to one vote for company A's Board can't be that valuable.  Actually, Google for instance neither pays dividend nor do you get to vote. Basically all you get for your money is partial ownership of the company. This still gives you the right to seize Google assets if you go bankrupt, if there's any asset left once the creditors are done (credit gets priority over equity). What is it that I'm missing? What you are missing is that the entire concept of the dividend is an illusion. There's little qualitative difference between a stock that pays dividend, and a stock that doesn't. If you were going to buy the stock, then hold it forever and collect dividend, you could get the same thing with a dividend-less stock by simply waiting for it to gain say 5% value, then sell 4.76% of your stock and call the cash your dividend. ""But wait,"" you say, ""that's not the same - my net worth has decreased!"" Guess what, stocks that do pay dividend usually do drop in value right after the pay out, and they drop by about the relative value of the dividend as well. Likewise, you could take a stock that does pay dividend, and make it look exactly like a non-paying stock by simply taking every dividend you get and buying more of the same stock with it. So from this simplistic point of view, it is irrelevant whether the stock itself pays dividend or not. There is always the same decision of whether to cut the goose or let it lay a few more eggs that every shareholder has to make it. Paying a dividend is essentially providing a different default choice, but makes little difference with regards to your choices. There is however more to it than simple return on investment arithmetic: As I said, the alternative to paying dividend is reinvesting profits back into the enterprise. If the company decided to pay out dividend, that means they think all the best investing is done, and they don't really have a particularly good idea for what to do with the extra money. Conversely, not paying is like management telling the shareholders, ""no we're not done, we're still building our business!"". So it can be a way of judging whether the company is concentrating on generating profit or growing itself. Needless to say the, the market is wild and unpredictable and not everyone obeys such assumptions. Furthermore, as I said, you can effectively overrule the decision by increasing or decreasing your position, regardless of whether they have decided to pay dividend to begin with. Lastly, there may be some subtle differences with regards to things like how the income is taxed and so on. These don't really have much to do with the market itself, but the bureaucracy tacked onto the market." As far as I know, the AMT implications are the same for a privately held company as for one that is publicly traded.  When I was given my ISO package, it came with a big package of articles on AMT to encourage me to exercise as close to the strike price as possible.  Remember that the further the actual price at the time of purchase is from the strike price, the more the likely liability for AMT.  That is an argument for buying early.  Your company should have a common metric for determining the price of the stock that is vetted by outside sources and stable from year to year that is used in a similar way to the publicly traded value when determining AMT liability. During acquisitions stock options often, from what I know of my industry, at least, become options in the new company's stock.  This won't always happen, but its possible that your options will simply translate.  This can be valuable, because the price of stock during acquisition may triple or quadruple (unless the acquisition is helping out a very troubled company). As long as you are confident that the company will one day be acquired rather than fold and you are able to hold the stock until that one day comes, or you'll be able to sell it back at a likely gain, other than tying up the money I don't see much of a downside to investing now. (yes, this should probably be a comment, not an answer ... but it's a bit long). I don't know what the laws are specifically about this, but my grandfather used to be on the board of a company that he helped to found ... and back in the 1980s, there was a period when the stock price suddenly quadrupled One of the officers in the company, knowing that the stock was over-valued, sold around a third of his shares ... and he got investigated for insider trading.  I don't recall if he was ever charged with anything, but there were some false rumors spreading about the company at the time (one was that they had something that you could sprinkle on meat to reduce the cholesterol).  I don't know where the rumors came from, but I've always assumed it was some sort of pump-and-dump stock manipulation, as this was decades before they were on the S&P 500 small cap. After that, the company had a policy where officers had to announce they were selling stock, and that it wouldn't execute for some time (1? 2 weeks? something like that).  I don't know if that was the SEC's doing, or something that the company came up with on their own. "Yes, I agree with you. Saying that the value of the stock will grow as the company grows and acquires more assets ... I don't see why. Okay, I'm a nice guy and I want to see other people do well, but what do I care how much money they're making if they're not giving any of it to ME?  Frankly I think it's like people who buy commemorative plates or beanie babies or other ""collectibles"" as an investment. As long as others are also buying them as an investment, and buying and reselling at a profit, the value will continue to go up. But one day people say, Wait, is this little stuffed toy really worth $10,000? and the balloon bursts. Confer Dutch tulips: http://www.damninteresting.com/the-dutch-tulip-bubble-of-1637/ As I see it, what gives a non-dividend-paying stock value is mostly the expectation that at some time in the future it will pay dividends. This is especially true of new start-up companies. As you mentioned, there's also the possibility of a takeover. It wouldn't have to be a hostile takeover, any takeover would do. At that point the buying company either buys the stock or exchanges it for shares of their own. In the first case you now have cash for your investment and in the second case you now have stock in a dividend-paying company -- or in another non-dividend-paying company and you start the cycle over." Technically, the difference between dividends and growth ought to be that dividends can be reinvested in stocks other than the one that paid them, which is a definite advantage if you actually have a strategy.  Dividend -paying stocks used to be preferred for exactly that reason, back in the days when fewer people were directly playing in the market and more knew what they were doing. Unfortunately,  getting a periodic dividend from a stock whose price is relatively steady isn't as exciting a game as watching your stock's value bounce around and (hopefully)  creep upward on a second-by-second basis. Those who are thinking in gambling terms rather than investment terms -- or who think they can beat the pros at high frequency trading, comment withheld -- want the latter, and have been putting a lot of pressure on companies to operate in the latter mode. That doesn't make it better -- certainly not for the longer-term investors -- just more fashionable. And fashion often means getting stuck with something impractical because everyone else is doing it. On this, I second Scrooge:  Humbug! "Once again I offer some sage advice - ""Don't let the tax tail wag the investing dog."" Michael offers an excellent method to decide what to do. Note, he doesn't base the decision on the tax implication.  If you are truly indifferent to holding the stock, taxwise, you might consider selling just the profitable shares if that's enough cash. Then sell shares at a loss each year if you have no other gains. That will let you pay the long term gain rate on the shares sold this year, but offset regular income in years to come. But. I'm hard pressed to believe you are indifferent, and I'd use Michel's approach to decide.  Updated - The New Law is simply a rule requiring brokers to track basis. Your situation doesn't change at all. When you sell the shares, you need to identify which shares you want to sell. For older shares, the tracking is your responsibility, that's all." Your gain is $1408. The difference between 32% of your gain and 15% of your gain is $236.36 or $1.60 per share. If you sell now, you have $3957.44 after taxes.  Forget about the ESPP for a moment. Are you be willing to wager $4000 on the proposition that your company's stock price won't go down more than $1.60 or so over the next 18 months? I've never felt it was worth it. Also, I never thought it made much sense to own any of my employer's stock. If their business does poorly, I'd prefer not to have both my job and my money at risk. If you sell now: Now assuming you hold for 18 months, pay 15% capital gains tax, and the stock price drops by $1.60 to $23.40: