The Rolls-Royce Holdings (LSE: RR.) share price simply hit yet one more all-time excessive. The shares are up 95% in a yr, and 600% in 5 years. And once we attempt to resolve if and when to promote, we will be confronted with contradictory concepts.

Run the winners and promote the losers, that’s what some folks urge. However doesn’t that imply we’ll get sucked into each bubble that comes alongside? So, possibly hold in and promote on the high? Effectively, no one ever tells us when the highest’s right here, do they?

And if we at all times promote fallers, that could possibly be an enormous mistake too. Wasn’t it billionaire investor Warren Buffett who recommended we should always need costs to drop if we intend to be a internet purchaser?

Take income?

It’s by no means flawed to take a revenue, goes the other suggestion. Wouldn’t which have tempted folks to promote Rolls-Royce shares a yr in the past and bag a fats 300%? Those that didn’t have since seen their shares double once more.

Causes to promote

Figuring out when to promote might be the toughest a part of inventory market investing. A key driver for me is after I suppose one thing’s modified and an organization could be operating out of steam. And I imply what the enterprise is doing, not the share price.

At Could’s AGM, CEO Tufan Erginbilgic spoke of “confidence in our guidance for 2025 of £2.7bn-£2.9bn of underlying operating profit and £2.7bn-£2.9bn of free cash flow.” He did level to tariff uncertainty as one thing to be cautious of. However Rolls isn’t going off the boil so far as I can see.

Diversification generally is a good purpose to contemplate promoting. If a inventory later falls, we will endure much less ache if it accounts for a modest proportion of our investments. Traders who purchased Rolls 5 years in the past in what was then a diversified portfolio could possibly be an unbalanced unfold now.

Some will likely be pleased with that. However I favor to sacrifice some progress alternative to offset the danger. So I’ll trim my holdings of any shares that begin to dominate.

One more reason is that promoting shares will be a horny choice if we’d like some money. The most effective state of affairs I can consider is approaching retirement with an ISA or a SIPP (or each) bulging with the wealthy proceeds of a lifetime of investing — and desirous to shift to taking some earnings.

Valuation

What if we see a greater funding alternative for the money? That may be a great time to contemplate promoting one thing we already maintain. And it brings me to my two key deciders: technique and valuation.

At Rolls we’re a forecast price-to-earnings (P/E) ratio of 37, falling to 27 by 2027. That’s not essentially too excessive for a inventory with robust progress prospects, particularly with rising internet money on the books. These pursuing a progress technique may even contemplate shopping for now.

Searching for earnings from high-yield dividend shares? Traders with that technique are unlikely to carry Rolls-Royce anyway.

The toughest resolution is for worth buyers who noticed an unjustified low price in 2020, who now must resolve when sufficient is sufficient.