That is a very grand title for a newsletter. But, I kid you not, what I am going to discuss this month is a rather overlooked but massively important factor in the success or failure of an investment strategy.

Every serious investor has thought through this element of 'the game'. Quite simply, if they have not, they are not.

So what can be this important?

SELLING.

Simple, huh?

Of course it is. When it comes down to it, most things in life are really quite simple. So is this. But, oh-so overlooked.

If you begin to study investment as either a hobby, an intellectual pursuit or a profession, you will find massive quantities of books that can guide you. I know, I have quite a few of them. However, the majority will help you to choose an investment. Stock or fund picking is a vital element in the investment process.

But, selling is where the profits are. After all, if you never sell, you never really make a 'real' profit, it is just a theoretical one. And theoretical profits do not pay the bills.

Years ago, I used to know a semi-retired farmer in the UK. He was a nice guy who had sold a pig farm whilst it was profitable and was living on his large 'capital'. He found investing to be more regular as an income source! (At least that is what he said.) Without trying to be mean, he wasn't the sharpest knife in the drawer and his investments backed my theory up.

The first time I was invited to his house he delighted in firing up his pc to show off his investment software and display to me his 'portfolio'. At the time he had holdings in about 100 different UK listed companies. But, about 70% of these holdings were losing money! I was amazed. He had boasted to me that he had 'never made a loss on a share'. Being unable to resist, I quizzed him relentlessly that evening until I found an answer I believed.

The truth was that he had bought all these shares but had NEVER actually sold one. He had not made 'a loss' because he didn't turn the shares back into cash. It also meant that he had never actually made a profit either but he neglected to mention that...

As you might be realising, this did not make him a good investor. He had not figured out how to either buy or sell shares. It was all pure dumb luck either way! When you also consider that I am talking about perhaps 1996 or 1997, towards the end of the greatest share bull market of all time, he was doing worse than pure dumb luck!! During the world's most profitable period for investment EVER, he had found a way to lose money consistently. That takes real skill.

Most people that invest money will never make the kind of errors of judgement that this man made. Most people will never have the money available to lose and it not alter their lifestyle. That may be a blessing in disguise!

With hindsight, as I got to know him better, I began to realise that he was actually a gambler at heart ... horses, cards, shares, spoof (though I never figured out the rules to that) and I'm sure more that I wasn't aware of.

However, most of us are not gamblers. We have some spare money and we want to invest it for the future. Hopefully, it will grow into something more substantial for when we need it. Perhaps it will pay for a child's education or our retirement. Whatever.

The issue that you need to think about when making an investment is when to sell up. The reason is quite simple, it is all about discipline. Even the best companies go through bad times. The course of a business cycle virtually guarantees this. We however, want to be selling during the good times for a profit, not holding on until it is too late for a loss.

Some investors have a preset figure in their mind - when the price is xx I'll sell. Others use a stop-loss system, or better yet, a trailing stop-loss. Each has a place in the investment world.

Alas, we can't all behave like Warren Buffett and buy with the intention of holding 'forever'. Firstly, he is better at this than us. Secondly, he tries to buy a business whole, which is probably out of your reach (I know it is out of mine!). And lastly, though I know he will hate to make a loss more than most other people, if it all goes wrong, he can afford it. His life will not be ruined by losing money (and he has been so successful that even his reputation is unlikely to be ruined).

Just remember that the simplest formula for making money in an investment is to 'Buy low and sell high'. Easy stuff. But when things are high, you need to remember to sell. Don't let greed get the better of you.

It has happened to me and probably every investor who ever lived. He or she held on too long and turned a decent profit into a sickening loss.