Buying stocks is easy. The huge selection of listed companies has something for every taste. But once the stock is in the custody, it becomes more difficult. Some fall in love with their stock and would never part with it. Many others, on the other hand, part way too early and far too often. Both behaviors can be bad for the return. Reason enough to think about when a sale makes sense and when not.
Four good reasons to sell shares
The most painful reason to get rid of a company investment is better than later, when your own investment thesis can no longer work. Painful because you have to admit to yourself a mistake. Therefore, that is the hardest point in my opinion. Who likes to give a mistake? In addition, acknowledging an error requires that you write down your reasons and investment hypothesis for an investment or remember it reliably before you buy.
A much nicer reason to part with a stock is the exhausted potential for further price appreciation. Most of the time, this means that your own investment thesis has come up and you can earn a decent profit. Of course, sometimes there is just happiness. But whether luck or bad luck, in such a situation it may be advisable, as so often, not to make rash decisions. After all, who can really be sure that an outstanding company will not continue to grow much faster than one would imagine in its wildest dreams?
Regardless of the current price of a stock and the future business prospects of the company, there are other reasons to leave your stock with a heavy heart. The most important rule is to only invest money in stocks, which in all likelihood you will not need for at least the next five years. If this condition no longer exists, then one should part with his shares. Whether this happens gradually or suddenly depends on personal risk tolerance.
With most of them having limited financial resources, a legitimate and good reason to get rid of their stock is simply to make better use of the money. If there is a better investment opportunity, it may be wise not to miss this opportunity. But beware, if the better chance turns out to be a flop, then there is not much left over except order fees and possibly resulting withholding tax. By the way, if you need the money for other nice or necessary things in life, that’s a legitimate reason to part with your stock.
Two bad reasons to sell shares
Actually, the two promised bad reasons to sell a stock are just one reason; namely the achievement of a specific course. No matter if the price reaches a certain level above or below your own buying price, that is not a reason to part with your own shares. The own purchase price should be completely hidden in sales decisions. If there are no personal reasons to sell a stock, then the only relevant question is the future development of the company and the stock price.
If the company still has a golden future ahead and the stock price may not have fully priced in that golden future, then you should urgently hold your stock. No matter how many profits or losses have already accumulated. If your investment thesis does not work out or if the potential is exhausted, then nothing out of the stock. No matter if with profit or loss.
An exceptional but good reason to sell stocks
If you have been dealing with the question of the right and wrong reasons for selling shares for some time now, the reasons given above have certainly come across one another. In my view, there is still a good reason to part with his stock, which is often not mentioned: you just do not care about the company anymore.
In order to make a reasonable assessment of the future prospects of a company, it is necessary to obtain information about the company and the respective sector. Of course, you make a mistake even if you closely follow the latest developments in the industry. In complete ignorance, we leave our success more and more pure happiness. That may be a good time, but every stroke of luck will come to an end someday.