Thus, you should try to take the emotion out of your sell decisions. To do that, set up criteria for selling before you purchase the investment. Write down your reasons for purchasing and what could cause you to sell. For instance, if one of your reasons for purchase was a company’s strong management team, that team’s departure might be a reason to sell. Reasons for selling can be subjective as well as objective. Subjective reasons could include changes in the company’s product line, competitive advantages, or management team. Objective reasons could include changes in sales, profits, or the stock’s price.

As part of this process, set high and low target stock prices that will trigger a review of the investment. You don’t have to sell when the investment reaches those targets, but you should review the investment to make sure you still want to own it. To limit losses, you might want to set rigid rules for selling when the price declines by a certain percentage of your purchase price, perhaps 7-10%. That way, you will be sure to sell before substantial losses are incurred.