People buy stocks for various different reasons, but all hope for a reasonable return on their investment. Some people buy stocks and shares simply for the biannual dividends. These are usually people who have invested in the long term and ideally hope for two things to happen. One, the share price will steadily rise, and two, the company will consistently pay reasonable dividends.
This kind of investment requires holding on to shares regardless of up and down movements in the short term instead of placing more reliance on overall growth over the long term. Knowing when to sell these kind of shares is difficult. It is probably only worth selling your shares if you feel the company concerned is in difficulties it cannot recover from. Then it might be worthwhile to sell before the share price starts to plummet.
The other kind of shareholding is keeping shares for the short term. This is gambling in much the same way as going to the casino. The idea is to buy shares when they are low in value and off-loading your shares when the price has risen sufficiently to make a comfortable profit. Because of fees and taxes this kind of investment is only worthwhile if you have a sizable amount of money to invest in a particular stock.
Ideally one always sells their shares when it is on a high to yield a tidy profit. However, shares go down as well as up. If a company is getting bad news coverage, or reporting annual losses, it may be prudent to sell immediately rather than wait for the share price to fall further, even if it is sold at a loss .
Another good time to sell shares is during a takeover bid. Sometimes this can inspire interest in the shares, and prices can rise significantly in the short term. Although if the bid is hostile, or in some instances falls through, the share price can dip suddenly. Once again, it is a balancing trick to know when to hold on to the shares, and when to sell to make maximum profits.
Buying and selling shares is mainly the preserve of the wealthy. If you are tempted to have a gamble, it is worth remembering a golden rule: Never buy shares with money you cannot afford to lose comfortably. It is a very high-risk business, and during bad times like the Wall Street crash, people lost vast fortunes overnight.