Both Charlie Munger and Warren Buffett rarely trade. They only initiate a position when they are confident that they know about the company and its prospects inside out. When they finally move, they move in size, acquiring large positions with no intention ever to sell. They’re looking for good companies that can continue to compound shareholder value year after year. The great thing about this strategy is that you do not have to spend hours trying to assess a company’s intrinsic value or trying to work out when is the best time to sell the stock. As long as the business continues to compound, you can hold it for eternity.
Munger and Buffett have proven over their lives, the profits from a simple strategy of buying the market’s best compounders and holding them for many decades creates a tremendous amount of wealth over the long run.
The best advice from Charlie Munger about when to sell a stock is simple:
You shouldn’t be buying stocks that you might need to sell in the first place. If you buy high-quality compounders and forget about them, they will generate returns year after year, without the requirement for you to spend extra time and effort assessing the intrinsic value or trying to decide when to sell. After all, if you do sell, you’ve then got to find an equally attractive opportunity, and there just aren’t that many good companies out there to choose from. If you’ve managed to buy shares in one of the best at an attractive price, why bother selling?