A significant amount of time and research is dedicated to selecting the high performing stocks. Once we have selected and bought our stock, we face another hard decision: when to sell our stock. If you chose your stock carefully, you probably wouldn’t need to pull out for awhile.
Stocks are unpredictable and go up and down all the time, which makes it difficult for investors to determine whether to sell or keep the stock.
Some people sell their stocks for personal reasons, such as they need the cash or the stock has become too volatile or risky for their taste. It could even be a good thing such that you’ve reached your financial goals. In that case, you may want to put your money in safer financial vehicles, such as a savings account. Aside from personal reasons, market performance also has a significant impact on your decision of when to sell your stock.
One market-related reason is if your stock drops by a certain percentage. Many traders set a stop-loss, or an arbitrary floor for the stock. When the stock price reaches this floor, the investor sells the stock before the stock price can drop any further. This is a common practice many investors use in order to limit their losses.
Another reason is if there are major changes in the industry or firm such as a new CEO or a change in their business plan. These changes can affect the value of the stock and cause it to drop.
A third reason is if the value of the stock spikes and becomes overvalued. If your stock rises drastically in a few days, it might be a good time to sell and take in your profits, especially if the outlook is that the value will drop back down. Of course, this requires you to do research and be familiar in judging the top and bottom of prices.
Of course, there may be other market-related or personal reasons that affect your decision, but these are just a few of the things you should be aware of when deciding when to sell your stock.
