Behind every share you buy, there should be an investment thesis. As my colleague Peter Lynch has said, you should be able to summarise why you own a particular share in a few simple sentences – in a way that your teenage son or daughter would understand.

You also need to retest this thesis on a regular basis, especially when there is major news on the company in question: the announcement of its financial results is an obvious point for reflection. If something changes that invalidates the original thesis, it’s best to sell and move on, even if this means exiting at a loss.