Selling stocks is simple, but selling stocks at a profit has a lot to do with your process of buying the stocks in the first place. If you bought high value stocks with lots of growth potential, then the question becomes, “When do I sell?”
If this were easy to figure out, we’d all be rich. Essentially, your selling strategy will be determined by your goals. Active investors are looking for short-term gains with minimal losses. Long-term investors are looking for good gains over time, possibly for retirement or other purposes.
Short-term investing is the riskier path with greater volatility and greater possible rewards as well as losses. A solid stock will go up over time and bring in a reasonable return five to 10 years down the road. In truth, most individual investors do a little of both.
Keeping track of your company’s news is important in deciding when to sell. Good news usually means the stock will be going up. Bad news usually means it will be going down. If the company is solid, with good management and a good product or service, you are better off riding through these little ups and downs.
When people panic in their selling, they usually sell at lows because they’re afraid the stock will go lower. Panic selling is almost certain to cost you over time. You have to be as dispassionate as the Buddha if you are going to sell for a profit in the long term.
I have had stocks go up very fast but not sold them because I thought they would continue to go up. Some of these stocks hit a high and then flamed out. They either never reached that high again or didn’t reach it again for years. On the other hand, I have sold stocks at what I believed was a high, only to see them go much higher.
The best investors in the world don’t always pick winners. You are operating on averages and you will be successful if you simply make more money than you lose. I have had some big winners and some big losers, including at least a couple of companies that went out of business. You learn from your mistakes and stay in the game.
One trick I learned in selling a successful stock was to only sell half of my holdings. I have had a 100% return on a stock (or more) and sold half of my stocks. By doing that, I got all of my money back on the first sale. If the stock continued to go up or went up some more at a later date, it was all profit.
I have also had to swallow my hopes and sell stocks at a loss. By selling stocks at a loss I accomplished two things. I got rid of stocks that were losing money or going nowhere. I reduced my tax burden with these losses. I loosened up some cash to use to buy other better stocks.
In selling stocks you need to periodically go through your portfolio and look for the dead wood. You need to weed out stocks that are not performing and put stop orders on any that seem to be declining. Take a hit and get some cash to invest with.
While I have sold many stocks at a loss and had companies go out of business, my overall portfolio is up. At its height, it was up over 200% (including stocks in the red). My particular sector focus is down quite a bit right now and my overall portfolio is down to a gain of about 52%. That is still an excellent gain, given that right now only about four of my stocks are in the green.
I am not panicked because I believe things are simply correcting and are not in a bear market. I have a number of stocks that I am going to sell at a loss right now because they are not going anywhere. Other than that, it is a time to sit tight and wait for the sector I am in to turn around.
The best way to sell your stocks successfully is to get your emotions out of the way. Look at your investment capital as if it were Monopoly money. Don’t get excited over big losses or big gains. Stay calm and make your decisions with a cool head. Stay on top of the market news and also the international news. Everything in the world literally affects your portfolio, so you’d better know what is going on.
Sell those stocks that are in trouble and look for sectors that are profiting from the current hard times. If you think your stocks will eventually be profitable, then hang on and ride out the current slow-down. Good luck!