Investing term

What is Sell rule?

Pre-committed conditions under which you'll exit a position — written before you buy.

A sell rule is a pre-written condition that tells you when to exit a position, decided before you buy and while you're calm. It guards against the two emotional failures of selling — bailing in panic, or refusing to cut a broken investment out of stubbornness. With the rule set in advance, the exit becomes mechanical rather than agonizing.

For example

"Sell if the company's competitive advantage erodes or the thesis breaks" is a sell rule — a pre-committed exit that beats deciding mid-panic.

Sell rule is taught hands-on in Stage 13 — Active Investing: Should You Even Bother?.

See the lesson →

Related terms

Active investingPicking individual stocks (or actively-managed funds) instead of just buying the index.CatalystThe event or condition that will close the valuation gap — and an estimated timeline.Circle of competenceThe set of industries, business models, and types of companies you actually understand well enough to evaluate.ConvictionHow strong your evidence is for a thesis — and therefore how much capital it earns.
← Back to the full glossary