In THIS post, I'm going to cover one VERY specific question I received recently; "When to sell stocks?"
That being said, if you are interested in learning the stock market, then learning when to sell at the perfect time to make a profit on your investment is CRUCIAL. It's also super important to learn how to identify the best times & reasons to sell your stocks.
When Should You Sell Your Stocks?
if you find it easier to identify the right times to purchase stocks but struggle when it comes to finding the right opportunities to sell your shares, then pay attention!
As a bonus, you will also learn when to sell your stocks to avoid making huge losses.
When there is convincing evidence that they are overvalued:
One of the best times to sell your stocks is when you have reason to believe that they are overvalued.
For example, if the price of one of your stocks has increased rapidly and has reached an unsustainable high, it may be a wise idea to sell the shares which you hold.
This is especially true if respected financial analysts believe that your stock is overpriced.
One way to know if a stock is overpriced is if its share price is significantly higher than its rivals. It's also common for stocks to become overpriced due to mass speculation.
Although it may be tempting to hold onto a stock that has drastically increased in price, it's important to remember that most speculators actually end up losing money.
Whereas, if you sell your stocks when they are overvalued, you are guaranteed to make a generous profit.
When a stock has received too much attention from the media:
Often stocks become overpriced when they receive too much media attention and too many individuals rush to purchase shares, which causes a stock's price to soar, in a short period of time.
A great example of this is the attention GME (GameStop) received in early 2021!
A LOT of people lost a LOT of money, because - let's be honest - they were buying into a meme, and didn't really know what they were getting into. Some people and funds made MILLIONS from this stock, others..not so much!
That being said, it's wise to make your own investment decisions and proactively seek out stocks that have solid financial figures.
If you notice that a particular company is starting to cut costs:
While all businesses look to cut costs in order to increase their bottom line if you notice that a specific company is laying off a significant number of employees, it may be time to sell your shares.
If a company is thriving, it will increase its workforce and it's likely that a company that is downsizing is about to experience challenging times.
If you regret your decision to purchase a specific stock:
If you find out new information about a stock that causes you to regret your decision, it's well worth selling off your shares before they decline in value.
There is no reason to hang on to shares in a company that is unlikely to expand or to retain its market share in the future.
Remember, that even if your shares have already decreased in value, there's no point holding onto shares that are likely to continue decreasing in value. It's better to take a 10% loss than to lose 60% of your investment.
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When you hit your predefined target goal for each stock:
Depending on your tolerance for risk, you may want to set a target goal for each stock. As an example, you may decide that you're happy selling a stock when it reaches a certain price.
On the other hand, if you're not particularly risk-averse, there may not be a need to set a target goal for the stocks which you hold.
When your dividend payments are reduced:
If you purchase blue-chip stocks in order to receive passive income, in the form of regular dividend payments, you may want to consider selling your stocks if your dividend payments are slashed.
Keep in mind, companies aren't required to pay dividends to their investors and can choose to decrease their dividend payments at any time. Some companies even decrease their dividend payments when they're experiencing growth and making competitive profits.
While decreasing dividends isn't always linked to the current financial health of a company, if you're looking to bring in a steady stream of passive income that you can quickly reinvest, you may want to consider selling your stocks.
Your stocks have suddenly become low float stocks:
If it's important to you that you'll be able to easily find buyers for your shares in the future, consider selling your stocks if they suddenly have a lower float. As low float stocks can be notoriously hard to sell and are known for their volatility.
If you're unsure of what a low float stock is, low float stocks have limited public shares available on the open market and have more shares classed as restricted stock.
Restricted stock can include shares that are owned by key investors, employees, owners, and members of a stock's board of directors.
If you hold low float stock, it may decrease in value in a single day of trading if the owners of its restricted stock make quick decisions to sell off their stock with key information that you don't have access to.
Consider selling off a portion of a stock:
If there is a particular stock that you're uncertain about. You may want to sell a portion of your holding in order to make a profit and to hold on to the rest of your shares.
This is a great idea if you want to minimize your risk while still being able to hold on to potentially lucrative stocks.
Avoid panic selling:
One of the most common mistakes which new investors make is selling their stocks when the value of their stocks takes a small dip. As an investor, you have to remember that all stock prices rise and decline over time. Even stocks that boast upward trends still experience small, temporary dips in price.
If you notice that one of your stocks has decreased in price ask yourself whether the dip is likely to be temporary or if its company is in long-term trouble.
If the stock in question has a great CEO and board of directors and a solid business strategy for the future, it's worth keeping on to your shares.
However, as mentioned above if you have doubts about the future success of a business, you may be best off selling your shares.
If you're confident in your abilities to be able to spot a bargain investment but struggle to identify the right times to sell your stocks, you now have the information which you need to sell your stocks at the opportune time.
In order to increase your profits and to minimize your chances of making significant losses.
Over the years I've reviewed DOZENS of Investment newsletters. As a result of this, I've also spent quite a bit of time doing reviews of my FAVORITE Stock & Investment Newsletters, which you can read below!
- Profits Unlimited Review
- The Near Future Report Review
- Palm Beach Letter Review
- Palm Beach Confidential Review
- True Wealth Review
Both are written by experts at the VERY top of their game, and I've made good money investing on picks from both of them!