Up to this point we have mainly looked at how to find good stocks, how to choose sectors and how to build a portfolio step by step with the Fairvalue Calculator method. The next question is obvious. When do you enter, how long do you stay invested and when is the right moment to sell or adjust a position. It is exactly in this tension between timing, patience and discipline that you find out whether a good strategy actually works in real life.

The most common mistake in the stock market is the hunt for the perfect moment. People wait for the absolute bottom, for a big crash signal or for that one magical day when suddenly everything is cheap. In reality this ideal entry point almost never exists. The technically correct sentence would be that the best time is always now, as long as your time horizon is long enough. At the same time it would be naive to invest all your savings on a day when the market looks clearly expensive according to the analysis. That is why it makes sense to stop thinking of the entry as a single point and to see it as a process instead. If the market analysis shows that valuations are rather ambitious, you buy in several tranches and deliberately keep part of your cash as a reserve. If the market becomes cheaper, more capital flows in. If it stays expensive, you move more carefully. In the background there is a simple rule that is often attributed to Keynes. Markets can stay irrational for longer than you can stay liquid. It is usually better to grow into positions over months or years, almost like a savings plan, than to jump into icy water with one big lump sum.

For this approach to work you need a clear time horizon. Fair values are not tomorrow morning’s prices. They are target zones that stocks work their way towards over time. In the literature you often find the assumption that under and overvaluations tend to correct within three to five years. Peter Lynch talks about the true value of a company showing up in the price within roughly three to ten years. The Fairvalue database shows a similar picture. A very large share of the stocks we have studied reach the fair value that was calculated at the time within a little more than five years. This is not a promise, but it is a realistic orientation. Anyone who uses a fair value method should keep in mind that a position may have to stay in the portfolio for five to seven years. Only when you invest money that you do not urgently need for that long can you develop the inner calm that this strategy requires.

That calm also depends on being able to think about risk in numbers. There is no approach without setbacks, not even when you focus on undervalued quality stocks. Even a solid selection can move clearly into negative territory in difficult phases. In stressful markets it helps to look soberly at what you may have to endure in a worst case. Historical data and our own evaluations suggest something like this. If you enter at a very unlucky moment and pick a rather unlucky mix of fair value stocks, you should be prepared for a temporary drawdown of around one third and for a recovery that can take several years. That sounds uncomfortable at first, but it is very far from a total loss. Even after heavy crashes, broad portfolios of quality stocks have tended to recover fully over time, sometimes even within a few months. The important point is that position sizes are small enough for such a temporary book loss to be tolerable, both financially and emotionally.

The question of how long to hold a stock is closely connected with the question of when to sell. In principle the fair value method is designed for long holding periods. The goal is not constant in and out trading, but long term participation in growing businesses that you bought at a discount to their value. There are essentially three reasons to close a position. The first is very simple: you need the money for private reasons. The second is that the original investment case is no longer valid, for example if profits collapse, the balance sheet deteriorates or the fair value drops significantly. The third is that a stock no longer fits the portfolio structurally, for example because its weight has become too large.

A practical way to handle this is to set clear limits for losses. Losses can occur even after careful analysis, because the world changes or because you were simply wrong. The point is not to avoid every mistake. The point is how you deal with them. Instead of letting a stock fall endlessly, you can decide before you buy at which loss you will admit that the idea was wrong and that the capital is better used elsewhere.

One simple rule is this. If the fair value is now lower than the current price, if the price is below the 200 to 250 day moving average and if the position is in the red, you sell, no matter how unpleasant it feels to lock in that loss. As long as the price is above the 200 to 250 day moving average you let profits run.

The freed up money can then move into another fair value stock that fits your rules better or into an existing successful position that still meets all criteria. In this way losses are limited while capital is moved to places where the chances of recovery and further growth are higher.

With profits the temptation is the opposite. As soon as a position shows a nice gain, you feel the urge to lock it in quickly. Here it helps to think clearly about the difference between price and fair value. As long as fair value is clearly above the price, the company is doing its job and the rising moving average is intact, there is no rational reason to sell a stock just because it has gone up. In many cases it is smarter to let profits run and hold the position until fair value and price have moved together or until the market is clearly overshooting. Only when the fair value gap has closed and the upward trend in the 200 to 250 day average has broken to the downside does it make sense to calmly decide whether to take partial profits, to exit completely or to simply continue holding because the company is still growing.

The next interesting topic is rebalancing, in other words how you look after the portfolio as a whole. The old saying that constant in and out trading makes you poor is directed at aimless hyperactivity, not at sensible adjustments. In a typical fair value portfolio something very natural happens. Some stocks perform very well for years. Others move sideways or lag a bit behind. Without any intervention a few winners will eventually dominate the portfolio while everything else hardly has any weight left.

The conservative way to deal with this is to check the weights regularly and pull back the biggest outliers. If you see two or three stocks making up a very large share of your portfolio, you can gently take some profits and spread that money across other positions or bring new fair value stocks into the portfolio. The slices of the capital pie become similar in size again, volatility decreases and the risk of a damaging concentration is reduced.

There is also a bolder variant that is closer to a trend following approach. Instead of consistently cutting back big winners, you focus on cutting losers and even add to strong winners. The idea is simple. Stocks that do very well for long periods usually have good reasons for that and tend to continue doing well. If you limit losses actively and expand your winners deliberately, you end up with a more concentrated portfolio that benefits strongly from its best ideas. This progressive approach naturally increases concentration risk and only suits investors who can handle the extra volatility and who keep an eye on their portfolio. In practice a mix of both styles often works well. Most of the portfolio is kept in sensible weights, while a defined part is allowed to focus more strongly on a few outstanding stocks.

Regardless of whether you rebalance in a conservative or progressive way, two points remain crucial. Do not sit on losses if the investment case is clearly broken, and do not cut your winners only because you feel nervous. The famous combination of letting profits run and cutting losses is not a clever slogan for a calendar. It is a very sober money management principle. The Fairvalue Calculator method provides the framework for this. Fair value, quality metrics, relative strength and market analysis help you base your decisions on clear signals rather than on fear or greed.

In the end timing in this strategy is less about hunting for magical entry points and more about the interaction between patience, reserves, a clear time horizon and disciplined maintenance. You do not buy because someone on television has named a price target. You buy because market, sector and fair value line up. You do not sell because there have been two red days in a row. You sell because fundamentals, valuation or portfolio structure have changed. The next big challenge does not lie in the chart or in the balance sheet but in your own head. How you handle panic, euphoria, fear of missing out and all the classic investor traps will ultimately matter just as much as any ratio. That is what the next chapter is about.