Selling too soon was not smart

MY DUMBEST investment involves microprocessor-designer ARM Holdings, which I simply sold too soon.

- S.C., online

The Fool responds: One of the tricky parts of investing is believing in yourself and patiently sticking to your convictions. If your research has made you pretty sure that a company has competitive advantages and a bright future, you may have to wait a while before the rest of the market catches on. ARM Holdings, which some see as overvalued at the moment, has rewarded long-term shareholders well. It has averaged a 30 percent annual gain over the past decade.

Of course, it's also smart to keep up with a company to make sure that it remains promising over time. If your original reason for buying into it evaporates, then consider selling. You also might consider selling if you find a more-compelling company. But don't be too fickle, because frequent buying and selling can be costly, due to commission costs and short-term capital-gains-tax rates. Aim to always have your money focused on your best ideas, the stocks you most expect to grow.