# Sell, reduce or hold

**FUND-13 · Fundamentals · Core**

**Lesson question:** Which new facts should change ownership?

Original fictional examples; educational writing, not live market data, orders or production approval.

## By the end

- Explain the mechanism in the lesson question.
- Reproduce the worked comparison and recognize its failure case.

**Prerequisites:** FUND-01

A sale decision compares today's information, price and alternatives. The purchase price belongs in the record but does not determine future business value.

Thesis failure, excessive valuation, financial deterioration and concentration are different reasons to reduce; a price decline alone proves none.

## Understand the mechanism

A good company can become too expensive. A cheaper stock can deserve selling if its value fell faster. Distinguish ordinary volatility from a broken operating premise and valuation completion from deteriorating quality.

Personal tax and portfolio constraints need account-specific treatment rather than a universal classroom rule.

## Walk through the process

Revisit the drivers that justified entry and classify what changed. Compare current value and risk with alternatives. Avoid waiting merely to return to entry, and avoid selling solely because the position shows a gain.

A decision should have a forward-looking reason.

## Evidence and decision boundary

These are original fictional teaching figures, not a company screen. Actual analysis should use primary disclosures and distinguish management's explanation from your inference. Favorable or unfavorable evidence depends on the specific business, valuation and risk; no single ratio establishes a recommendation.

## A worked example

A stock bought at fictional 30 with base value 40 now trades 48 while value is unchanged. The investment has profited, but the valuation case is weaker.

Alternatively it trades 24 after customer losses reduce base value to 20. The lower quote is not automatically attractive. The graph pairs each current price with its relevant revised value.

## Graph: Sell, reduce or hold—worked comparison

**Horizontal:** Price / value in each scenario  
**Vertical:** USD per share

Fictional data from the written example. The chart organizes the comparison; its shape is not a forecast.

Complete numerical data are embedded in `scripts/fundamentals/FUND-13.js` and displayed as an accessible table in the HTML lesson.

## What would invalidate the reading?

Anchoring to entry can trap an overpriced winner or a broken loser. A desired rebound is not an economic thesis.

## Check your understanding

### Must a position below entry be held until it recovers?

**Answer:** No.

**Why:** Current value, risk and alternatives govern the decision.

### What is the critical failure to avoid?

**Answer:** Anchoring to entry can trap an overpriced winner or a broken loser. A desired rebound is not an economic thesis.

**Why:** Explain this risk before treating the example as a decision rule. A correct calculation does not guarantee a favorable market outcome. **Critical risk check.**

## Takeaway

Return to the question: Which new facts should change ownership? State the observed facts, the assumptions and the failure condition separately.

## References and provenance

The cited references support definitions and conventions. The teaching prose, tickets and numerical scenarios are original; they are not attributed as historical market observations.

- [SEC Financial Statements Guide](https://www.sec.gov/about/reports-publications/beginners-guide-financial-statements)