We all have stocks in which we lost a lot of money because we were overconfident. We tend to forget about them during a bull market. But I suggest you remember them now, so you’ll have fewer of those names to remember in the future. Risk is still there; it's just hiding under the joyful sentiment of the bull market.

Believe me, it will show its ugly face. It's just a matter of time.

Discipline Counts

In a bull market, it is easy to forget about selling discipline and then turn into a “buy-and-forget-to-sell” investor. Every time you sell a stock, you look dumb because it usually goes up afterward.

I recently sold several stocks. Shamelessly, paying absolutely no attention to the fact that I sold them, they went higher. I don’t feel smart about that decision. However, when I bought those stocks, I set valuation targets. When they approached the targets, I quickly reviewed their fundamentals. They hadn't changed much. The decision was obvious: Sell.

Cyclical bull markets teach us not to sell, while cyclical bear markets teach us not to buy. If you let the market tell you what to do, you have no process.

But the bell doesn’t ring when bull or bear markets are over.

You can't worry about marking the top in every sell. My objective isn't to buy at the “bottom” and sell at the "top.” My objective is to buy a great company when it's cheap and to sell it when it's fairly valued. I suggest you do the same.