The good news is that if you have chosen your stocks carefully, you won't need to pull out for a very long time, such as when you are ready to retire. But there are specific instances when you will need to sell your stocks before you have reached your financial goals.
You may think that the time to sell is when the stock value is about to drop, and you may even be advised by your broker to do this. But this isn't necessarily the right course of action.
Stocks go up and down all the time, depending on the economy; and of course the economy depends on the stock market as well.
This is why it is so hard to determine whether you should sell your stock or not. Stocks go down, but they also tend to go back up.
You have to do more research, and you have to keep up with the stability of the companies that you invest in. Changes in corporations have a profound impact on the value of the stock. For instance, a new CEO can affect the value of stock.
A plummet in the industry can affect a stock. Many things, all combined, affect the value of stock. But there are really only three good reasons to sell a stock.
The first reason is having reached your financial goals. Once you've reached retirement, you may wish to sell your stocks and put your money in safer financial vehicles, such as a savings account.
This is a common practice for those who have invested for the purpose of financing their retirement. The second reason to sell a stock is if there are major changes in the business you are investing in that cause, or will cause, the value of the stock to drop, with little or no possibility of the value rising again. Ideally, you would sell your stock in this situation before the value starts to drop.
If the value of the stock spikes, this is the third reason you may want to sell. If your stock is valued at $100 per share today, but drastically rises to $200 per share next week, it is a great time to sell, especially if the outlook is that the value will drop back down to $100 per share soon. You would sell when the stock was worth $200 per share.
As a beginner, you definitely want to consult with a broker or a financial advisor before buying or selling stocks.
They will work with you to help you make the right decisions to reach your financial goals in reference to your specific needs. This i very important to do before conducting any buying or selling, or any decisions for that matter regarding investing or money.
When it comes to investing in stocks, investors usually spend a lot of time in determining what particular stock to buy and the quantity they should buy. The process involves tracking not only the performance of the stock they are interested in but also the market in general before a decision is made to buy. The same holds true when selling your holdings.
Although most people handle their stock investments through brokers, it is best to do your own homework and not be at the mercy of somebody whose only interest is to make money, regardless if that is exactly the same motive you have for investing.
If you have chosen your stock portfolio wisely, chances are you do not have to sell them for a long time. You can hold on to them even if their value does not go up as much as the others because of their stability. However, there are instances when you do have to sell and that is when the dilemma comes in, when is it time to really sell your stock holdings?
For most investors, the rule of thumb is to sell only when you have already realized your financial goals, not before.
Considering that the value of stocks is similar to a roller coaster ride and is highly dependent on the world economy in general, people mistakenly believe that whenever there is worldwide recession that then is the right time to unload stock holdings. However, stock values are as unpredictable as the weather, there are times when they go up and down for no reason at all. When stock values drop, even your broker may advise you to sell, however, this is not always the logical course of action.
Stock values may drop due to attrition or overall market conditions, because the stocks of companies A, B, C and D dropped, stocks of company E may also drop not because of the same reasons but as a market reaction to the situation of A, B, C and D.
More research must be done and a careful analysis of the variables involved studied in order to determine the causative factor for the drop in value of the stock of E. There are only three reasons why you should sell your stock holdings, these are:
1.Sell your stock portfolio only if you have already achieved your financial goals. This is the perfect time to unload your stock holdings and put them in safer investment portfolios like government bonds, treasury notes or time deposits.
2.Secondly, if the company you invested in diversifies into uncharted business waters and the general consensus among market analysts is that the move may cause the company's stock to go down. When this happens, sell your holdings as soon as possible in order not to get burned. Of course, the opposite may happen but that is a risk you have to take.
3.The best time to sell is when the value of your holdings goes ballistic. Since what goes up must come down, it is best to sell at this point, regardless if the value continues to go up at least you would have at least already gained 50 to 75 per cent (or more) of your original investment.
A simple word of advise is always to consult a broker or financial adviser; not one but two in order to have a second opinion on the matter and always do your own research instead to totally relying on the decision and advise of others. This way you will reach your financial goals sooner than you planned.
Both Pino Tedesco & Ryan Ginster are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.