Maximising Your Gains From Growth Stocks - When Should You Sell Your Shares?

If you're lucky enough to have one or two growth stocks in your portfolio

, then you're in a great position. These stocks will often generate decent profits because they will consistently increase both their profits and their dividend payouts each year. However the only problem you have with these growth stocks is deciding when to sell.

My own personal advice would be to hold on to these treasured stocks for as long as possible. In other words as long as they are continuing to boost their earnings each year, there is absolutely no reason to sell because the share price will usually rise to reflect these fundamentals in the long run.

This view is supported by the greatest investor of them all, Warren Buffett. He is the buy and hold investor that every aspiring investor wants to replicate because his record is incredible. There is no great secret to what he does. He simply buys shares in top quality companies, often market-leading companies, that have a long history of growth, both in terms of earnings and dividends. He then holds on to these stocks for years and years, reinvesting the dividends along the way to reap huge profits.

He doesn't believe in banking a profit as soon as it is there, like so many other amateur investors. He simply invests in the best companies around and holds on to them for as long as possible. This is very hard to do in reality because it requires a high level of patience, but it does generate substantial returns.

The hardest part of this strategy is finding the right companies to invest in to begin with, but as long as you focus your attention on some of the large-cap stocks that have long histories of earnings (and dividend) growth, you should have few problems finding suitable candidates. It's also a good idea to wait until the wider stock market is looking oversold as that will inevitably give you a great entry point in your chosen stock.

Anyway the point I want to get across is that you shouldn't really be thinking about selling your growth stocks until they stop being growth stocks. In other words when they stop increasing their earnings each year. Yes it may be exciting trading in and out of different shares all the time, but the real money is made by investing for the long-term in high quality growth stocks, particularly when the dividends are reinvested.

by: James Woolley

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