When Should I Sell My Stock?

When Should I Sell My Stock?  Probably the hardest part of investing is knowing when to sell. This dilemma is caused by one of two reasons: We bought without a plan, or We had a plan, but didn't have the discipline to follow it.
Probably the hardest part of investing is knowing when to sell.

Think about it: It just went up 3% today, should I sell now because there's probably a correction tomorrow? Then it goes down 2% the next day; should I sell before it goes down further? But the short/medium/long-term trend is still going up, should I sell later? But if the trend is trading in range, should I wait until the break-out? What if it doesn't brake-out and instead breaks down?



This dilemma is caused by one of two reasons:
  • We bought without a plan, or
  • We had a plan, but didn't have the discipline to follow it.

It's important to remember that the market behaves the way it behaves because that's just the way it is. It doesn't care how much you've bought nor at what price. It also does not care what trends you've observed, and could not care less about conforming to those trends. It may do so, but it's not obliged to.

That's why it helps a lot to have a strategy, even if it's relatively simple: buy-on-breakout-sell-at-resistance, "go long-term", or even just cost-averaging for x number of years.

Finding a strategy that fits you and works for you is like winning half the battle already. The other half of the battle is knowing which strategy to choose.

While some of that can boil down to ideology (i.e. technical vs fundamental analysis; long-term vs "sureball" short-term; etc.), the best way to pick a strategy suited to you is to have a goal.

What's the money for? How much will you really need? When will you need it? Is there even a time constraint? Or are you just anxious to get returns on your money?

These are questions you answer before buying a stock - even before picking which stock to buy.

Without a goal, there's no way to know what strategy is best for you. It's like looking at different maps; they all work, they're all correct. But they all lead to different places. What's "correct" in this case depends primarily on where you want to go - and you have to know that before hand.

With the volatility and "excitement" of the stock market, it can be easy to lose sight of the basics. It's tempting to "maximize" profits by timing your buying and selling. But the market is not inclined to help you; and if you're "winging it" it's all too easy to succumb to greed or fear.

Not only would you not end up maximizing profits, you'd probably end up feeling disappointed with whatever profit you made or envious of what additional profit you could've potentially made. That's not a great place to be.

Begin with the end in mind and work from there.


If you liked this article, please subscribe to my feed, like me on Facebook, circle me on Google+, or follow me Twitter @thePFApprentice. It's free, you won't miss new articles, and you'll also get my free ebook: the Super Savings Guide.

Enter your email address for your free subscription




How To Invest In The Stock Market Series:



photo credit: Niklas Hellerstedt via photopin cc

No comments:

Post a Comment