As you all know by now, I don't believe in trading stocks.

Actively trading stocks requires too many right decisions - knowing when to buy, when to sell, and what to buy to replace what you sold. Having to make many decisions usually leads to bad decision-making.

Actively trading stocks also eliminates the possibility of ever hitting an investment home run - you know, that stock that goes from $20 to $200. A trader never sees $200; he or she is out at $25 or $30.

All things equal, I would rather buy and hold an investment forever. Buying and holding means no tax liabilities on capital gains. (Remember - you only pay taxes on capital gains when you sell stock. If you don't sell, you don't pay). Also, buying and holding stocks means owning a stock that could increase, not just 50% or 100%, but 1000% or 5000%. Now I know that it's the rare stock that advances ten- or fifty-fold. Nevertheless, if you are constantly selling stocks after they increase 25% or 50%, you'll never own the stock that rises 1000%.

I think one of the worst pieces of investment advice ever given is that old adage, "You'll never go broke taking a profit." You may not go broke, but you'll never get rich. The stocks that truly change your financial future aren't the ones in which you make 25% or 50% on your money. It's the stocks that rise 500% or 5000%.

Take a look at your own portfolio. What you see is probably not that much different from what most people see. Let's say you have 10 stocks. Probably three or four of them are dogs. Another three or four are decent stocks that track the overall market. But the stocks that carry the portfolio are those couple of stocks that you bought many years ago, added to over time, and have appreciated substantially. It's usually the case that most of our big stock market profits are made off the backs of just a few portfolio holdings. If you are constantly trading in and out of stocks, you're likely missing such big gainers in your portfolio.

Since I suspect I'm no better at trading stocks than the next guy, I don't sell very often. Still, legitimate reasons exist to sell an investment.

The primary reason to sell is because the reasons you bought didn't materialize. This sounds a bit silly, but I guarantee you that many people reading this column have no idea why they continue to own certain stocks. And that's my point. If you don't know why you own a stock, you won't know when to sell.

Because it's so important to know why you bought a particular investment - especially when deciding whether to sell - I suggest you maintain a journal on your investments. Write down your reasons for buying an investment. Perhaps you buy because you're excited about a new product. Perhaps you buy because the company's profits and sales are growing at a fast rate. Perhaps you buy because company executives have been buying the stock in recent months. Whatever the reason or reasons, write them down.

Maintaining a journal not only provides a record for future reference but also crystallizes your thinking on that particular investment. Indeed, you might find that, after writing your reasons, your initial excitement for the investment idea wanes.

Another reason to write down why you bought an investment is that knowing why you bought will help you decide whether to buy more when the investment declines in price. Indeed, if the reasons you bought are still valid, you will be embolden to buy more during declines.