Warren Buffett has often been quoted as saying "the best time to sell an excellent business is never". Some people make the mistake of thinking this means you should never sell anything in your portfolio. What they miss is the key concept of excellent business: that is, an enterprise that earns high returns on capital, has a strong market position, some sort of durable competitive advantage (you can't replicate Coca-Cola or Wrigley's gum, for instance), able and honest management, and a history of being responsible with shareholder capital by returning excess funds in the form of cash dividends or stock buy backs.

That's the key difference. When you find an excellent business at a fair (or even better, bargain) price, you want to buy and hold for as long as the underlying economics are healthy. Charlie Munger has often pointed out that over long periods of time, it's difficult to generate shareholder returns much in excess of the rate earned on shareholders' equity, even if you buy at a discount. Don't make the mistake of holding beaten-up, sub-par businesses for longer than you should. Buy quality. Reinvest the dividends. Diversify if you don't know what you're doing. And act rationally.