never sell low

The Only Cardinal Sin of Investing – Never Sell Low

Never Sell Low – The Only Cardinal Sin

Among the pantheon of investment mistakes, there is only one cardinal sin. If you forgive the mixed avian and devout metaphors for a second, let me explain what you should never do: Never Sell Low.

If you can avoid this only cardinal sin – as a buy-and-hold investor – you will do well in the long run. Let’s figure out why people sell low and ponder how to avoid this only cardinal sin.

Never Sell Low in Accumulation

In order to avoid the only cardinal sin of investing, first understand that volatility is not risk.

If you are young, the actual risk is that inflation will eat away your purchasing power. You MUST invest in something. The risk is doing nothing with your money. Then, you will though omission, definitely lose to inflation.

Understand that short term volatility is not a risk to the young buy-and-hold-dollar-cost-averaging investor.

Next, volatility is not a bug of the stock market; it is a feature. That is, the risk premium of owning stocks comes from people confusing volatility and risk.

If you are a buy-and-hold investor with time on your side, you will out-earn inflation and be rewarded. There is no 15-year period in history where, despite an immense amount of volatility, the market is risky.

The only way to lose over any extended period of time: sell low. Never Sell Low.

Further, stock market crashes are not a bug, either. They are, again, the cost of admission… why you make money on your money. Crashes are why stocks pay more than cash or bonds.

During market volatility and market crashes, those who sell low transfer their money to those who rebalance from bonds into stocks.

Please understand that when you are young, volatility and crashes are not risky; they are opportunities.

Never Sell Low in De-accumulation

I hope most of you get that the young should not only not fear crash, but celebrate them! Dollar cost average into stocks at lower prices. Rebalance.

When you are de-accumulating, however, market crashes are a bird of a different feather. For those withdrawing funds from their nest egg, a market crash is a real risk with a different moniker: Sequence of Returns Risk.

While I have written quite a bit about sequence of returns risk; it is quite easy to overcome if you plan ahead. Remember: never sell low.

You can set up buffer assets against sequence of return risk. Or, you can de-risk prior to retirement.

Another option: a bond tent.

What is clear, you must go conservative prior to retirement in order to avoid sequence risk.

The goal: never sell low in de-accumulation. Have at least 3-5 years (or even 10 years) of non-stock assets to get you through the worst of time.

Why Do Folks Sell Low?

So, why do folks sell low?


Emotional investors sell low. Don’t charge off the hill with the other lemmings. And Don’t Watch CNBC. Ever.

Remember that Fear and Greed drive the investing cycle for individual investors. If you are a buy and hold investor, and frankly if you have sold low in a prior cycle and learned your lesson, then you are in a position to hold out through the crankiest of market cycles. Understand what the purpose of your investment is, and never sell low because of emotion.


What to do if you need money and the market is down? That is why you have cash as part of a cash bucket plan. That is why you have mental accounting and a tax-efficient withdrawal plan in place.

The key to never selling low: don’t ever need to! Plan for sequence of returns risk at least 5 years before retirement. As I like to say, the best time to go conservative before retirement is the day before the market crashes. The second-best time to start is 5 years before your retirement date. A rising glidepath allocation after retirement can help get you where you need to be.

Don’t ever “need” to sell stocks and you will never sell low.

What about Tax Loss Harvesting? Isn’t that selling low?

Yes, by definition, when you tax loss harvest you are selling low. You do that to lock in the loss for tax purposes. The very next step of tax loss harvesting, however, is buying a non-substantially similar asset immediately after selling for the tax loss.

That’s right, you are not out of the market but for mere moments. Your S&P 500 fund becomes a Total US fund, or visa-versa, seconds after you lock in the loss.

Other Sins of Investing

As there are other birds, there are other sins as well. Here is a non-complete list of additional investing sins:

Complicated Investments

Rick Ferri keeps it simpler than most. I hope he will publish his book on the education of the index investor at some point. Remember, most “hedges” against downturns such as structured products are too complicated and too expensive. Your insurance is never needing to sell low.


Buy and hold investors understand that the best predictor of future returns is low fees.


Its not how much you make, it is how much you get to keep that matters. Active funds will cost you an arm and a leg in turn-over. Understand that short term capital gains are not your friend

Not sticking to the plan

Or not having a plan in the first place.


Most folks use leverage at some point during their life. It is called a home mortgage. You borrow money so that you can live in a house and meanwhile, invest in your future. Beyond that, routine use of leverage might force you to sell low to cover your losses. If your goal is to avoid the cardinal sin of investing, you can get there without the sin of leverage.

Listening to other people or the media

The worst part of this covid thing has been media coverage of it. Yes seriously, if one group made the pandemic worse, it was the media. Remember their job is not to report accurately what is going on; their job is to sell advertising to eyeballs.

So, too, with investing. Their job is not to inform you, but to obfuscate the truth behind lies and mistruths… so they can sell you expensive crap you don’t need from an industry that puts their bottom line above your best interests.

Summary: The Only Cardinal Sin of Investing

Never sell low. Ever.

If you can do this, you can be a successful investor.

Know that crashes and volatility are expected and the reason why you make money owning stocks. Long term buy-and-hold investors don’t care if the market crashes.

You have a plan: never sell low.

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  1. I would like to do a $20,000 ROTH conversion. The market is high now, so now would be a good time to take the money out of my IRA, but I’ve heard best time to invest in ROTH is when market is down because when it comes back up, those earnings are tax free. How would this work? Thanks

  2. Another exemplary analysis and it speaks for the ages. Capitalism is not for the faint of heart…..but it beats the alternatives spouted by socialism’s evangelists and utopian politicos and alas even by many pundits, as you wisely note. John Bogle would say “Amen, brother.”

  3. I forgot to add that, in fairness, people in their 70s and 80s experiencing severe hardship may have no option but to take a loss on their portfolio, the better to remain solvent and independent. For those fortunate enough to have excellent defined benefit plan pensions, e.g. retired military and cops, your wisdom is rock solid.

  4. “Forgive me Father FIPhysician…for I have sinned.” 🙂 Actually…not as it relates to selling low at least. The old Buddhist saying ( or was it Saint John Bogle? )…”Don’t just do something…stand there” comes to mind. This theory/practice was put to the test just over a year ago when the S & P 500 dropped 34% in just 22 trading days. It was a “puckerish” time indeed. Of course since that time it’s up 75% or so more than making up for the plummet. Stay on target, young Skywalker…and perhaps turn off both your range finder and television. 🙂

  5. Love it! Well said in every respect! I am sending this post to my adult children hoping they read every word which echoes what I have been telling them also. Thanks for what you do!

  6. One of the most succinct and accurate investment articles I have seen. Like the lawyer joke about lips moving, the moment a talking head or advisor says I think or we believe shut it off. Only suggestion is to emphasize putting your bonds and reits in tax deferred accounts and equities in taxable accounts.

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