It’s really hard to sell stocks. Especially the ones you’ve owned for a while. They become like old friends you never want to say goodbye to.

Hey. They’re just stocks. Not even pieces of paper anymore. Just bits and bytes of electromagnetic energy on some computer somewhere. When it’s time to dump a stock, push the button and get rid of it.

But how do you know when to let those stocks go?

You can’t just buy a stock and let it sit in your portfolio forever. Even stocks that look rock solid today (remember Pulman Sleeper Car, Enron, Kmart). Whenever you sell a losing stock you can always let it drop further then buy it back and ride it up again (watch out for the IRS wash sale rule).

Here are eighteen warning signs to watch for:

1. When a stock’s price drops 10% to 15% from a recent high.
2. If some problem arises in the industry or the company.
3. If the stock price has stagnated. Why not sell it and buy something else that might shoot up?
4. The stock’s P/E is higher than others in the same industry. and you can’t explain why it’s out of sync.
5. In general, earnings are falling for the company or the industry.
6. The company has cut its dividend.
7. A key manager leaves and the new manager seems lost. (i.e. Can’t clearly articulate the vision for company growth and profitability, reluctant to make needed changes, from a totally different industry)
8. The stock price falls below $10 a share.
9. The company’s sales margins and return on equity look bad compared to other similar companies.
10. The company is about to embark on a large boneheaded acquisition. i.e. AOL acquires TimeWarner.
11. The company itself has been acquired and the acquisition makes no sense.
12. You discovered the stock sometime ago and enjoyed a nice price run-up but now the stock has been discovered by the world. Now where will new buyers come from to drive up the price?
13. Key managers in the company start to sell a huge amount of stock. Or they start to buy puts to protect their stock if the price falls.
14. When the company’s sales are on the decline and key management tries to revise their bonus plan. Fire the bums or sell the stock.
15. Declining earnings growth. The company’s earnings growth has drastically slowed from the previous year. An EPSG% less than 20%.
16. The company continues to or has started to burn cash. When a company uses more cash than it makes, it’s just a matter of time before the ACE BOARDUP trucks arrive and the company shuts down.
17. The company is just too big sustain stellar growth. once a company explodes past the ten billion sales mark, it’s hard to grow at the same pace it did in the pre-ten billion dollar years. It might be time to find another rising star unless it is pretty obvious the company can hit at 15% EPSG. (i.e IBM, HPQ, AMZN)
18. A boneheaded new product announcement. i.e A leading personal computer operating system company decides to make a foray into operating systems for copy machines.

If your stock shows more than a few of these warning signs, then you need to ask yourself why you’re holding onto the shares?