Investing - When should you sell?

TL;DR

Hold on to a successful business as there is no limit to how big it can get; selling too early may result in missed opportunities.

Transcript

welcome to the question of the week it's our new segment where we listen to what our clients ask us over we can come up with a question or two the we thinks worthwhile relating back to you guys so the question of the week is when we're reviewing a portfolio clients often ask us when should we sell so this is often asked when a business has gone par... Read More

Key Insights

• 😷 Clients frequently ask about the optimal time to sell a successful business in their portfolio, especially after significant gains.
• 🥺 Instead of focusing on specific gains, it is advisable to hold on to a well-performing business led by competent management with a vested interest in its success.
• 👨‍💼 Scalable businesses have the potential for unlimited growth, making it beneficial to resist the temptation to sell too soon.
• 👨‍💼 Investors often make the mistake of selling successful businesses too early and missing out on significant profits in the long run.
• 🥺 Holding onto good businesses for an extended period has been a successful strategy employed by Warren Buffett and can lead to substantial results.
• 👨‍💼 Selling underperforming businesses may be necessary, especially after profit downgrades.
• 😃 There is no upper limit to how big a scalable business can become, emphasizing the importance of long-term investment strategies.

Questions & Answers

Q: When should you sell a successful business in your portfolio?

The general advice is to hold on to a successful business, especially if it is performing well and led by competent management. Trying to time the sale based on specific gains may result in missed potential.

Q: What is a scalable business?

A scalable business refers to a company that can significantly increase its revenues and profitability while keeping the increase in costs to deliver its products or services comparatively low. These businesses have the potential for long-term growth.

Q: Should you sell a business that is not performing well?

If a business experiences a profit downgrade or consistently underperforms, it may be prudent to consider selling it. However, it is essential to evaluate each case individually as selling underperforming businesses too soon can also result in missed opportunities.

Q: What is the risk of selling a successful business too early?

Selling a successful business too early may result in missed opportunities for further growth and profits. While investors may want to lock in gains, it is often more beneficial to hold on to a business that has the potential to continue scaling.

Summary & Key Takeaways

• Clients often ask when they should sell a successful business in their portfolio, especially when it has seen significant growth.

• The recommendation is to hold on to the business as long as it is performing well, led by competent management with a vested interest in its success.

• Trying to time the sale based on specific gains (e.g., doubling or tripling of investment) may result in missed potential as scalable businesses can continue to grow.