“When do you keep a stock? When do you sell it, and when do you add to it?” That's the question Suze Orman recently posed on her "Women & Money" podcast — and it's one that many investors struggle with, especially during market volatility. Investing in the stock market can be intimidating, and when prices start to drop, it's easy to panic and make emotional decisions. But Orman advises that reacting out of fear is often a mistake. 

Why Fear Can Be Dangerous for Investors

“The main internal obstacle to wealth is fear,” Orman said. “Fear, everybody, just that simple.” She pointed out that fear is pervasive right now, driven by economic uncertainty, rising costs, and geopolitical tensions.

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This fear can lead to knee-jerk reactions in the stock market. Orman explained that when investors panic and sell off stock, it can drive prices down further. Orman used Palantir as an example. In the last month, it has dropped from about $125 a share to below $80 a share.  

“You feel good for a while, cause maybe you sold Palantir at 95, and now here it’s at 85 and you feel like such a winner. Are you kidding me?” she said, adding that short-term gains from selling out of fear can result in missed long-term growth opportunities.

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When to Keep a Stock

Orman advises that if a stock has strong fundamentals — good management, a solid product, and future growth potential — you should hold onto it even if the market dips. She reminded listeners about the market downturn in 2022 when major tech stocks like Apple, Microsoft, and Nvidia performed poorly. “They were referred to as the Stinky 7 because of how badly they had gone down,” Orman said.

But those who stayed invested saw significant returns. Nvidia, for example, rebounded with a 240% gain in 2023. Orman reminded listeners that those who bought stock at much lower prices were still sitting on significant gains. And even if they didn't, if the stock is fundamentally strong, it’s better to stay invested rather than react impulsively to market swings.

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When to Sell a Stock

While holding onto strong stocks can lead to long-term gains, there are times when selling makes sense. Orman advised selling if a stock's value becomes too large a portion of your overall portfolio. This helps to reduce the risk of losing too much if the stock suddenly drops.

She explained that selling can also be a smart move if you need the funds for other investments or financial goals. However, Orman warned against selling just because the stock has gone up or down temporarily. Taking profits too soon can lead to missed opportunities if the stock rebounds.

When to Add to a Stock

Orman supports adding to a stock position when you have the funds to do so strategically — through dollar-cost averaging. This means investing smaller amounts consistently over time, which reduces the risk of buying at a peak. “You have another $300 that you can put into Palantir totally. So all right, put $50 at a time in it so that you have at least six more times that you can buy the stock if it continues to go down,” she advised.

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Orman shared her own strategy with Palantir. She mentioned how she bought more shares when the price dropped from $113 to $98 and again when it hit $85. She said this approach lowers the average cost per share over time and allows for greater potential gains when the stock eventually rises. However, she also cautioned that this strategy works best for those who have the funds to continue buying as the price drops.

Bottom Line

Orman's advice boils down to staying calm and focused on long-term growth rather than reacting to market fear. Keeping, selling, or adding to a stock should be based on the strength of the company and your overall financial strategy — not panic over market swings.

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This article 'When Do You Keep A Stock? When Do You Sell It, And When Do You Add To It?' Suze Orman Says Don't Sell Out Of Fear originally appeared on Benzinga.com

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