How to Decide When to Sell Your Stock

Posted by MoneySavvy on Aug 26th, 2010 | no comments home title

Riding the waves of the stock market can be both fun and terrifying, all wrapped up into one exciting bundle that many people adore. The ultimate reason for owning and selling stock is of course to make money. Deciding when to sell your stock can be nerve-racking due to the “what if” factor. Here are some tips to make the decision easier.

Plan ahead – When you purchase a stock, do so with a plan in mind that you are going to sell it when it hits a certain value, regardless of any other factors. Set up a sell-order so you won’t have to make those decisions in the thick of it; it will be automated for you. Decide what your sell price is, both high and low, or if it experiences a certain percentage drop.

Stay up on the news – Pay attention to the company behind your stock and the market behind their industry. If the company starts to experience problems (especially of the legal kind) or major upheavals, consider selling immediately. If the company has stagnated in their products, profits, and stock prices, you might want to sell before it starts to go south. If the overall market industry is dying out and the company isn’t innovating new ideas, it’s also a pretty good bet the stock price will begin to slip before too much longer.

Financial need – If you are experiencing a financial crisis and selling some stock could get you out of it, then it’s wise to do so. It’s tempting to take out a loan or use credit cards instead, but compare the interest rate versus what you have been earning on stocks and factor in any tax issues. It could be more affordable and less stressful to just sell now and then pay yourself back with new stock purchases in the future.

Personal conflict – If the stock you own is supporting a company whose actions go against your beliefs, whether religious, moral, environmental or political, then there is nothing wrong with selling and purchasing where you feel more comfortable. The current market should not be a factor in decisions of this type.

Achieved goals – You may have purchased all or part of your stocks with a certain goal in mind. That goal could be earning enough in a particular portfolio to fund an elaborate vacation, or it could be to pay for retirement or Junior’s college. Whatever your reason – if the goal is upon you and the stocks have done their job, then it’s time to cash in.

Trading on the stock market shouldn’t be a stressful event. Hire a good trader to handle to your stocks. Set your goals and use your stock to achieve them. Plan ahead and know what you are going to do “if.” Even through the most crushing economic times, stock holders with well-managed portfolios tend to come out on top.