It is important to know the reason why you are buying a stock – it has a direct correlation to the amount of time you may hold it. It is equally important, however, to assign a reason for selling a stock at a particular point of time. Why? Because that has a strong correlation to the probability that you will buy the stock again – at a higher price. To illustrate: A recent development in Brazil led to a spike in global sugar prices. Now, if you bought a sugar stock because of that, you may sell it. But if you bought it because sugar companies are transitioning from the agro to the clean energy sector because of ethanol – then you got it right, and there is no reason to sell. In fact, something interesting happened – or did not happen – before the coming Maharashtra elections which adds to the list of reasons why sugar stocks should not be sold.
