To Sell a Stock, Be as Mechanistic as Possible

Eddy Elfenbein, who writes about investing at Crossing Wall Street, was named by CNNMoney as "the best buy-and-hold blogger" on the Web. Yet even buy-and-holders (myself included) have to be disciplined sellers of stocks.

Last month, during an hourlong interview in Washington, D.C., I asked Elfenbein how he approaches the selling process. Watch the video below for his insightful answer. (Run time: 1:52; there's also a transcript below.)

Brian Richards: How do you decide, what's your process for determining when to sell a stock? Can you take us through that?

Eddy Elfenbein: Well usually I'm crying, I'm curled up in a fetal position [laughs] and then I'll... I try to be very disciplined and think about investing as business decisions. That's the best way to go about it. And whenever I decide to sell I always try to pair it with either another buy.

Sometimes I'm able to set a specific date; I'm going to do it at this point. Or if I'm going to replace it with a buy or a partial and go into cash. So I try to be very mechanistic about how...

Richards: Is that something that you learned over time because you had...?

Elfenbein: Yeah, because then you pull the trigger, you get nervous, you feel like you have to do it, you feel like the price is going to get away from you. And if you just sort of learn to discipline yourself -- part of it is just mastery and control over your own emotions. I always said if Mr. Spock, if things didn't work out at the space academy ... I mean he would have been a great investor because you just see I don't have those emotions, and you push those away.

I basically look at the fundamentals and if I see something that's deteriorating, I don't like the earnings reports, I don't like some of the decisions they've been making, that's when I'll pull the trigger. Or sometimes I think I've just made a good profit and it probably has run its course.

For more from my interview with Eddy Elfenbein, see his take on the jobs report, or check out his site, Crossing Wall Street.

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