Stocks – How To Know When To Sell
Posted on Oct 24, 2009 under Sell Time Share | 6 Comments
While quite a bit of time and research goes into selecting stocks, it is often hard to know when to pull out, especially for first time investors. The good news is that if you have chosen your stocks carefully, you will not need to pull out for a very long time, such as when you are ready to retire. But there are specific instances when you will need to sell your stocks before you have reached your financial goals.
You may think that the time to sell is when the stock value is about to drop and you may even be advised by your broker to do this. But this is not necessarily the right course of action.
Stocks go up and down all the time, depending on the economy and of course the economy depends on the stock market as well. This is why it is so hard to determine whether you should sell your stock or not. Stocks go down, but they also tend to go back up.
You have to do more research, and you have to keep up with the stability of the companies that you invest in. Changes in corporations have a profound impact on the value of the stock. For instance, a new CEO can affect the value of stock. A plummet in the industry can affect a stock. Many things all combined affect the value of stock. But there are really only three good reasons to sell a stock.
The first reason is having reached your financial goals. Once you have reached retirement, you may wish to sell your stocks and put your money in safer financial vehicles, such as a savings account.
This is a common practice for those who have invested for the purpose of financing their retirement. The second reason to sell a stock is if there are major changes in the business you are investing in that cause, or will cause, the value of the stock to drop, with little or no possibility of the value rising again. Ideally, you would sell your stock in this situation before the value starts to drop.
If the value of the stock spikes, this is the third reason you may want to sell. If your stock is valued at $100 per share today, but drastically rises to $200 per share next week, it is a great time to sell especially if the outlook is that the value will drop back down to $100 per share soon. You would sell when the stock was worth $200 per share.
As a beginner, you definitely want to consult with a broker or a financial advisor before buying or selling stocks. They will work with you to help you make the right decisions to reach your financial goals.
Chris Peterson
http://www.articlesbase.com/finance-articles/stocks-how-to-know-when-to-sell-94005.html
October 24th, 2009 at 9:50 pm
Is it better to buy and hold stocks or sell when I make a profit?
I have been doing well picking stocks but dont know if I should be holding the stocks that go up or selling them when I make a profit.
October 25th, 2009 at 2:52 am
It all depends on what it is you are doing. Are you saving for retirement…..or just out to make a quick buck? The answer to that question only you know.
If you are in for retirement, I would hold the stocks, providing they are in a good stable company. If your out for a quick dollar….when you think you have made enough off the stock, or feel its going downward, unload them.
Currently I am short selling and doing good. I like it when things go bad, as its the only good way I am aware of to make any money off of stocks.
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October 25th, 2009 at 2:54 am
always determine your sell price before you buy, some stocks you will buy for a trade, some should be long term investments.
If you can make 15-20% in a few weeks take profits, learn to use trailing stops.
It is more important to sell losers, use stop loss orders, recovering from more than 15% losses is very difficult.
Hope this helps your thinking.
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October 25th, 2009 at 2:56 am
This depends on your time horizon and amount of risk you can tolerate.
What I would do would be to set a target sell price.
This will be the price at which you are willing to sell, either at a loss or gain.
Let’s say you buy stock at $50 a share. Then, you might want to set a target price at $60, in which you are ready to sell, or $40 the price in which you are willing to sell before any more losses. This is if you don’t want to be a long term investor. Keep in mind though, short term gains are taxed at your ordinary income bracket, not the long term rate with a high of 15%.
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October 25th, 2009 at 2:58 am
What are you "picking" them for? What is your criteria? If it’s capital appreciation, then you should sell when a profit can be had. If you’re looking for dividend income, that’s another story.
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October 25th, 2009 at 3:00 am
Your question is a good one and I can’t give you the answer, but what I can do is help you make the decision yourself.
First, do you spend a lot of time watching the market and your stocks? If so then you could potentially call yourself a trader, in which case you can sell when you make a profit and then pick the stock back up on a dip.
On the other hand, if you happen to watch your stocks once a week just to see how they’re doing, then your of the buy and hold category.
The second thing you need to ask yourself is how are you choosing which stocks you buy?
If your using fundamentals such as debt ratios, P/E ratios and other long term measures, the you are definitely in the buy and hold category.
If you use charting techniques and measures of volatility, and stochastic charts, then you typically are a short term investor who takes profits and buys on dips.
You need to decide for yourself how confident you are in the stocks which you buy. The more confident you are the longer you should be willing to hold the stock.
I suggest that every time you get into a long position (buy a stock) you look at the price history (charts) of the stock to determine where you think would be a reasonable place to sell.
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I am an active stock and options trader.