When Buy-and-Hold Investors Should Sell

Figuring out when to sell stock is the most difficult thing for a buy-and-hold investor, but a new service aims to provide some guidance on that front.

It's so much easier to think about buying stocks than selling them, because buying requires only a basic optimism that future growth will create wealth. Who wants to think about selling -- a decision that is likely far down the road?

Traders, on the other hand, are always thinking about when "enough is enough." They're willing to lock in a profit without remorse, even if the stock goes higher; they're willing to take a loss quickly, without "hoping" that the stock will rebound.

Successful traders have a unique characteristic that allows them to conquer emotions such as hope and dismay, greed and fear: self-discipline. It's the defining force that winnows out the successful traders from the losers. And it's in short supply among investors, who tend to panic at market extremes.

But there might be some help for mom-and-pop investors who want to employ the same type of market discipline as the professionals.

Stop-Loss Advice

A new service called >SmartStops.net has been created to give ordinary investors a dose of automatic self-discipline, advising them in advance when to sell a stock or exchange-traded fund that they own. It's done through a tool few investors use -- the "stop-loss" order.

A "stop-loss" order is a sell order, placed on your broker's books, telling them to sell "at the market" when the stock falls to a specific price. It's designed to protect profits from evaporating when a stock declines. And because it can be set for one day, or an "open" order -- sitting and waiting in case the stock falls to a certain level -- you don't have to be watching prices all the time. Almost every broker will accept a stop-loss order on a stock you own.