Stock Market Sell Guide
When you own a stock, choosing the right time to sell is one of the most important decisions you have to make. If you decide to sell too quickly, you potentially miss out on extra profits. You also have to consider fundamental implications and other factors when making this decision.
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Function
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The purpose of selling a stock is to realize a profit or to take a loss. When you buy stock, you can hold it for as long as you wish. Until you sell the stock, the only money that you can make is through company dividends. If the stock appreciates in value, you can sell it to realize a profit. If the stock declines in value, you may have to sell it to avoid losing your entire investment.
Short-Selling
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Short-selling is a special type of stock transaction that involves trying to profit from the decline in value of a particular stock. Short-selling involves selling a stock that you don't actually own. If the price of the stock declines in value, you make a profit; if the stock increases in value, you lose money. This technique can be used in anticipation of a market decline to increase profits.
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Market Sentiment
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When trying to decide the best time to sell a stock, you may want to look at the market sentiment. Market sentiment is the general consensus of what investors believe in the marketplace. If traders are particularly optimistic about a particular stock, it can go up in value significantly. When this happens, you may want to sell your shares so that you can realize a nice gain before the price of the stock comes back down.
Company Changes
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Another time that may be appropriate to sell stock is when the company changes its fundamentals. Part of what goes into stock prices is the underlying information from the company. If a company changes its business plan or a popular CEO retires, it may be time to sell your stock. Looking at the underlying company is important instead of focusing only on what investors think.
Not Buying More
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When you have a portfolio of stocks, if you decide not to invest more money in a particular stock, you're essentially doing the same thing as selling that stock. For example, when a mutual fund decides not to buy more of a particular company but instead use the money to invest in other companies, this is much like selling stock. If you don't want to liquidate your shares, you could simply choose to not put any more money into a company in the future.
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