When to sell a stock is one of the most difficult decisions you will have to make in stock investing. Here is some help.
Selling stocks:
To avoid a negative return, we should decide and give equal importance to sell, while we buy the stocks in the first place. While investors refuse to sell due to unrealistic expectations, stubbornness, lack of interest or mere in attention, they would be facing the negative impacts of it. It doesn’t mean that you need to cash in every time your stock moves up. You would have to decide where to put proceeds. At the same time, don’t have to panic and bail out in the aftermath. Investors should keep in mind the commissions and taxes would cut into your gain.
Weak Hold:
When the analysts get uneasy about a stock, they use the phrases like “Weak hold.” It means, don’t buy any more shares and if you’ve got a profit, seriously consider selling. Unless a company faces serious problems, the Brokerage houses’ research departments are slow to issue sell signals.
Right Time To Sell a Stock:
The fundamental changes, no matter what the analyst’s report says. Here are some clues that indicate it is time to consider selling a profitable stock:
- Follow up the corporation’s prospects
- Its earnings progressions
- Its business success as reflected in market share
- Unit sales growth
- Profit margin
- Annual reports
- News stories
- Research updates from brokerage houses
- Investment newsletters
- Too much debt
If the company’s fundamentals start to weaken, it’s time to reconsider your investment. For example, a fast-expanding retail chain whose sales per store, after rising for years, suddenly decline. Maybe the profit margin has slacked off after a series of consistent increases. These problems could signal that the business has peaked.
Dividend Cut:
The investors should pay close attention to, if any cuts; it reflects the serious events and signals financial difficulties. The progression and security of its dividend are important to any stock’s prospects. When companies start cutting, it’s time to reconsider your investment.
Target Price:
When the stock reaches the target, you should consider selling the stock. Each stock purchase should include an analysis on the stock worth, both up and down. A good target is to double or triple your money or with a stock to a loss of 20%. These guidelines can maximize your investment and avoid the damage that gets too painful. You can set a ‘mental protective stop’ and sell any stocks that hit your mental stop point. Once you have reached your target, take the money.
Annual Exercise:
Once a year, take a look at the stocks in your portfolio and ask yourself if you would buy the same stocks today. If no, you need to reassess your investment.You might miss some gains from time to time, but by holding on for too long, you would be a falling victim to the Wall Street maxim that says: “Bulls make money, bears make money, pigs get slaughtered.”
Expressed my own opinion, do your own research and maximize your profit by selling at a right time.
Stay tuned to our next post “The four stages of a market cycle”
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