A Guide to Selling Stocks
Helps to avoid panic stock selling!
Why might a guide to selling stocks be useful to you? If you thought share buying was a complicated process,
I suggest to you that stock selling can generate more emotion. I have less difficulty in buying stock compared to selling.
Could it be because of the buying process I use?
The more likely reason is that I, like most, have difficulty accepting that some investment decisions do not work out as well as others.
Or in the case where I am making a profit, I have trouble in accepting that the stock may continue to rise in price after I have sold.
My experience suggests that it is too easy to hold on to losing positions.
Rather than holding on too long with the hope that the decline in price may reverse, selling out can mean that you may be able to buy in at a lower price later on, or invest in other shares that are looking more attractive.
As a result, I find it useful to have predetermined ‘rules’ to aid the process of selling stocks and avoid panic stock selling. The scenarios below outline my selling ‘rules’.
While some of the decision points in the following scenarios may appear to border on mechanical investing, I consider that it is extremely important to have these ‘rules’ imbedded in my investment plan.
Inaction in some instances can be very costly. However, long-term results are the arbiter as to whether the rules are valuable ones to follow.
The rules cover all the situations that I have encountered. Here they are ...
When you are on a winner, why not stick to it and let your profits run? How often do investors sell their best performing investments when they don’t need to? The answer is - more often than you think. More ....
Selling Because of Need
There may be a number of compelling reasons why you need to sell. If you want to finance a holiday or pay for a wedding, then having a diversified portfolio may provide greater options as to which shares to offload. Find out why. More ...
Selling Due to Limited Performance
The stock market is a fluid beast and half the current stocks will not be around in 20 years time for one reason or another ... and it is not necessarily because many companies will fail - but some will, despite your best predictions.
The most common reason why stocks disappear relates to company takeovers and companies hiving off divisions that they do not want for one reason or another.
So 'stuff happens' and you need to be in a position to sell if it does. More ...
Selling for Brighter Prospects
I sell in a circumstance where I need the capital to invest in another company that appears to have much brighter prospects.
My experience tells me that opportunities present themselves if I have the time to search and read.
The clues are usually provided by interim and annual company reports, together with articles in the financial press.
Find out how to identify brighter prospects. More ...
Selling Due to Overvaluation
How do I recognize an overvalued stock? The simplest way might be to see if the stock is priced at a historical high for the year. This can be easily seen by viewing a price chart available from online stock-brokers' websites.
But there are other ways. More ...
Selling for Tax Purposes
There are a number of ways of selling stock to minimize tax, some legal and some not. For example, a wash sale is a term used to describe selling and purchasing the same stock to gain a tax benefit. But is it legal? More ...
Part-selling to re-balance the portfolio
In an extended bull market, some of the stock holdings in a portfolio may significantly exceed the weighting originally set because they have become overvalued.
Part-selling overvalued holdings is an important portfolio tracking strategy. But what are the benefits? More ...
Of course, if you have encountered other situations, you should consider developing suitable rules to keep you on the straight and narrow when it comes to selling stocks.
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