Is there a simple strategy of selling stock over a period of time?

Question

I've often read a simple strategy of buying stocks or funds over a period of time: spread it over time with fixed amount of dollar in each period. Since the price fluctuates, fixed dollar amount means that you'll buy more when the price is low and you'll buy less when the price is high, which sounds a pretty good strategy.

How about selling stocks. For example, employees often receive a significant number of their company's stocks as compensation (e.g. vested RSUs) and may want to sell those and reinvest in a more diversified manner. Selling all at once seems very prone to risk of market fluctuation - for example if the price happens to bottom during the sale.

On the other hand, the fixed dollar strategy above doesn't work, because it means selling more when price is low and selling less when price is high. Is there a good strategy for selling that is simple to follow, perhaps analogous to the buying strategy above?

Answer 1

The best strategy for RSU's, specifically, is to sell them as they vest. Usually, vesting is not all in one day, but rather spread over a period of time, which assures that you won't sell in one extremely unfortunate day when the stock dipped.

For regular investments, there are two strategies I personally would follow:

1. Sell when you need. If you need to cash out - cash out.

2. Rebalance - if you need to rebalance your portfolio (i.e.: not cash out, but reallocate investments or move investment from one company to another) - do it periodically on schedule. For example, every 13 months (in the US, where the long term cap. gains tax rates kick in after 1 year of holding) - rebalance. You wouldn't care about specific price drops on that day, because they also affect the new investments.

Speculative strategies trying to "sell high buy low" usually bring to the opposite results: you end up selling low and buying high. But if you want to try and do that - you'll have to get way more technical than just "dollar cost averaging" or similar strategies. Most people don't have neither time nor the knowledge for that, and even those who do rarely can beat the market (and never can, in the long run).

Answer 2

Yes, there is an analogous strategy for selling: it's to sell a fixed number of shares per period of time.