The Peter Cundill Sell is the principle that you sell half of your investment once it doubles, recovering 100% of the principal you risked.
Assume you invested at the last S&P500 closing low, which was on March 9, 2009, at S&P 500 676.53. You multiply times 2 = 1,353.06, and sell half your holdings when the S&P500 rises to that level, according to the idea.
But the S&P500, for example, hit that level way back on April 27, 2011 at 1,355.66. So you doubled your money a long time ago, sold half your stake and recouped your entire principal. But then what? Cundill thought you were free to do anything with the remaining amount invested (which are the profits). The principal has to be reserved for another doubling opportunity.
What would a conservative bet with just the profits have meant from there?
Say you were to wager that the S&P500 would increase not 100% more as before, but only 25% more, because the S&P500 would have to hit 2706.12 to do the former. You are not greedy, just optimistic, you say. Is that a conservative plan? Maybe compared to what has just happened since 2009, but not really, because since 1970 the median annual return only has been north of 12%, half as much as that.
So you decide to let the profits ride, hoping for just an additional 12% on the index going forward. Here are the milestones of 12% from 1,353.06 up to today's current market level (1,949) at each of which you presumably sold half of your stake, gradually exiting the market and its growing risk:
1515.43 (February 2013)
1697.28 (July 2013)
1900.95 (May 2014).
An initial $10,000 invested this way made you $10,000 by April 2011 (not counting dividends).
The remaining $10,000 made you $1,200 by February 2013.
The remaining $5,600 made you $672 by July 2013.
The remaining $3,136 made you $376 by May 2014.
Since then you've had only $1,756 riding the market, making an additional 2.5% to date, or an additional $44. Total made: about $12,292 nominal. And you sell today.
By way of contrast, the buy and hold investor over the same period is up about $18,700, assuming he bought in low like you did and sells . . . TODAY. But trust me. He didn't buy low. And he won't sell today, tomorrow, in time to escape the correction, or any other time. He'll just ride it on down right past the 35% down marker at which point he'd begin waving up at you as he's headed lower.
