No. of Recommendations: 2
If you have to sell: Should you keep the best companies if they are overvalued? Or should you sell the problem companies at low prices?

When selling the best over-valued companies, unless they are held in IRAs, you will likely be dealing with capital gains tax.

Taxes and dividends need to be considered. If your (hypothetical) over valued company pays predictable and rising dividends that you harvest for living expenses, then it's probably prudent to think twice, and thrice, about selling. The consequence would likely be a dip in dividend income and capital gains taxes to boot. If, however, you owned, say, Berkshire Hathaway in an IRA, a company that pays no dividend, and the stock price reached the moon, it would make sense to skim a little off the top at least. In other words, it's on a case by case basis.

If "problem" companies are on unsound financial footing, with no redemption in sight, then it makes sense to sell them before thinking of taking the clippers to the flowers.

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