Investing In Stocks

When to Sell Your Stocks -

Stock Selling Strategies

When to sell stock can be a difficult call.

Unfortunately, many people end up selling a stock if it starts plunging in price or if the market takes a dive. This is usually the wrong time and the wrong reason to sell.

You don't want to sell a stock because you panicked or for other emotional reasons. You want to sell a stock because it's a sound investment decision.

Therefore the $10 million question is when do you sell a stock? There are primarily two reasons why people sell - personal and market.

For the sake of brevity, we'll skip the examination of personal reasons such as you maybe need the cash or you've reached your risk tolerance level, and focus on the market reasons.

Many investment gurus agree that there are only a few reasons why you would sell a stock. Stock selling strategies are simple, but frequently overlooked.

The company deteriorates. Has the company lost its direction? Have their fundamentals weakened? Have they had products that failed or lost market share due to new competition? Are their executives experiencing integrity issues?

These are important reasons why you should question whether continuing to hold a stock is the right thing to do. If the company has these types of issues and aren't demonstrating some type of plan of action which will put them on the right path again and fast, then it may be time to sell.

The stock is either overvalued or has surpassed its target price. It's only a matter of time before a stock pushed beyond its value will fall. Accurately predicting what the target price of a stock should be can definitely be challenging.

However, it's a good idea to know what that price will be. If you are unsure how to calculate it yourself, check out what the professionals are saying or monitor the stock's message boards.

They are usually good sources for determining a target price if you are unsure of calculating it yourself.

Your portfolio needs to be rebalanced. If your portfolio is out of alignment, you may consider selling some stocks in order to rebalance.

For example, maybe you had a killer year in stocks. Your portfolio is now weighted 70% in stocks instead of the 60% you feel more comfortable maintaining. You may decide to sell in order to reach that particular alignment again.

However, be sure to consult a tax accountant before selling to discuss the potential tax consequences and potential taxable capital gains issues you may experience.

Obviously, we can't predict the future or which way any given stock is going to move. It's a roller coaster ride for sure. However, we can definitely develop our own strategy and guidelines for knowing when to sell stock in order to protect our wealth.