Understanding When to Sell Stock

If you have a little stock that maybe you got on a lark a while ago how do you know when to sell stock? There are times you could want to do this perhaps to scrape together a little money for something important. Well, investment experts have a basic list of conditions you should probably make sure you can satisfy before going on to unload your holdings. If you find that the following six conditions aren't met at the time you are thinking of selling, it would be advisable to perhaps hang onto your shares a month or two longer.

It's a funny thing, but people who own stocks love knee-jerk reactions to any goings-on in the stock market. When they see that there is a company whose stock has gone up, they rush out to buy some of it without thinking about whether it will continue to rise. If something falls, they rush out and sell without thinking about whether it will continue to fall. It's all a day too late with them. Deciding when to sell stock, you want to make sure you aren't reacting a day too late. Basically, you need a kind of game plan before you buy into any company's stock.

Usually, we base our decision to buy into stock for a reason usually it has to do with the way it's rising or the way it is priced, or the way you believe in the company's products. In fact, you should always make sure when you buy stocks, that you're buying for a clearly-defined reason like one of these. The other conviction you need is the belief that the stock has the potential to rise. If your belief doesn't seem to be borne out by facts, you should recognize that the company isn't what you thought it was, and that it might be time to sell. People make the mistake of hanging onto a stock just because it's already there.

Any time you have a mixture of several kinds of stocks in your portfolio, you're bound to find that there are some that do better than others at any given time. We all need to do a bit of spring cleaning on our portfolio from time to time. We need to take a look from time to time to see how things are going and to get rid of stuff that doesn't seem to perform that well. For instance, if you find that the current year is great for mid-cap stocks, you want to sell the mid-cap stocks for profit and try buying stocks that are not doing so well. Does that sound like madness? Not really that's what playing the stock market is all about buying when things are low and selling when they are high.

If you have stocks that aren't part of a retirement plan, your tax liabilities need to play big part in your decision to do with when to sell stock. You need to realize that any time you sell stock, the income is taxable. So if part of your plan is to make, say, a 15% return on your stock purchase you should consider what you make after you pay taxes. You also need to consider transaction costs.

And finally, do make sure that you keep on top of the news. If there's something going on with the company that doesn't bode well for your holdings, that could be a great time to sell.

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