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When to Sell Stock and
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Will Determine How Much Is Your Profits
Summarized Overview
In this article, you'll learn under what condition you can sell your stocks.You'll also learn till when you should hold your stocks, the important things you should monitor for maximum return and ways to mitigate your losses in stock investing or trading.
When to Sell Stock: Now or Later
Ideally, you should keep your stocks as long as possible. You might not need to know when to sell stock. If you pick good stocks the way I do and bought them when it is within its margin of safety, your portfolio will most probably grow as time goes by.However, there is time when to sell stock is a better option.
In fact, some stock investors acknowledge selling stock as one of the great 'exit strategy'. This especially true if you incline to stock trading than stock investing.
For stock traders, profits or losses can only be realised when the stock is sold. Meanwhile, stock investors can still make profits without selling the stock. They prefer recurring income from dividend payout than capital gain from the stock price appreciation.
Either stock traders or stock investors, situations below are applicable to when you should sell your stocks.
Fundamentally Changed
If at all possible, this should be the only reason to when to sell stock. Change in the stock fundamentals require more in depth research as the previous data might no longer correct for earnings projection. Changes include restructuring of its business model, different business focus and directions or change in the company’s key management.
Have Better Investment
It goes without saying that you may also sell your stock if there is more profitable investment. No matter either you are changing to other stocks, invest in mutual funds or buying properties for rental income; as long as you in better position to reap the most profits. Limited resources can be fully optimised.
Stock is Over Valued
During bull market, high quality stocks (assuming you are using my good stock pick method) will appreciate value. As more and more stock investors interested in the stock, it is not unusual thing to watch the stock to be pushed way past its true value. And more importantly, with so much hype around the stock, they are often set up for a fall.
Therefore, you may use the strategy of selling them first and buy back at lower price. However, be prepared to watch it keep on going up after you sell, as it happen sometimes. Just don’t second-guess yourself; it could have more easily gone the other way. This is why, you need an accurate knowledge on the top and bottom of prices to justify your decisions.
Need Some Cash
Unexpected circumstances may affect the time to when to sell stock too. It is not wrong to sell stock to solve your financial emergency, especially the underperforming one. However, it is advisable to have some emergency cash funds that are not meant for investment used as a buffer. After all, basic investing rules two; start investing if you have enough money (open in new window).
Reached Financial Goal
You set your financial goal before. Whether for retirement, children’s education or buying new home, you can start liquidating your stocks. I’ll guarantee you this, you will be totally satisfied and no regret investing in stocks once you had achieved desired goals.
If you noticed, dropped in stock price is not included to when to sell stock. As a matter of fact, I bought more shares if the price is going down (if its fundamental remain intact). I did so because I can buy them at cheaper price; just like you are crazy for a Christmas sale for the thing you want the most!
Should there are no changes in its fundamental, strong performance from past can be used as a yardstick to project its future earnings.
However, if you buy low quality or unproven stocks, you need to have stop losses to avoid possible huge losses.
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