When is the best time to sell?
The goal of engaging in stocks trading is to ultimately turn a profit. Many experts would advise that you simply buy stocks at a low price and sell them for a profit. Of course, this advice is very simple and does not capture all the nuances of trading. To indeed make a good profit, you must be certain of your actions and dedicate a particular strategy to achieve this.
The Importance of Strategy
Without a good strategy, a bit of simple advice could lead to a net loss. For example, you may decide to buy stocks and sell them for a profit within the day, which is a strategy that could be rewarding just as it is risky. Diversifying your portfolio over a period of time is another strategy. Well-diversified long-term investors make good profits in the long run. However, both strategies require a good appreciation of trading and the markets.
Day Trading vs Long-Term Investment
In day trading, investors buy stocks and then try to sell them off very quickly. The time may be within a few minutes or hours of acquisition. Day trading may look like a non-profitable betting scheme to the uneducated or the uninformed. The best way to succeed in day training is to spend a copious amount of time studying the market and understanding its nuances.
With long-term investment, you only need to know the basics of the stock market. With the potential for compound interests, long investments can be very rewarding. For example, if one investor decides to invest an average of 200 dollars at an 8% interest for 20 years, in the end, it will make a total of $120,000. Another who does so for only 10 years will get about $35,000. In long-term investment, consistency matters, and patience is also a strategy here.
Which is Better?
The answer to this is determined by your personal preference, and what your current financial situation allows. A custom-made strategy guarantees that you gain a lot of returns on very salient, well-placed investments. Or you can simply play the safest card by investing in both long-term stocks and day trading. The long-term investments give you the security to make steady progress and buffer against the many mistakes that you might make in the process of building the experience you need to succeed in stock trading.
When to Sell Your Stocks
You know it is a bad time to sell a stock when you are making decisions based on speculations, fear, and volatility. Do not follow uniformed positions. Do not sell due to sudden fear in the market or when it is too soon to tell.
However, you can sell a stock if you notice that the stock has reached its peak value and any additional time would lead it to be overvalued or lose its price. Sell a stock if you feel that the nature of the business or market you invested in is changing. This could be due to a policy or leadership change which could lead to losses or bad stock dilution. You should sell your stock if you realize that the business is not making as much profit as before. You can calculate if a company is losing money by calculating its P/E ratio which is simply the stock share price divided by the earnings per share. Lastly, know when to admit you made a mistake and sell the stock if you either overestimated its value or predicted wrongly.
InvestSika helps you to become long-term investors with ease by providing you a community you can follow peers and learn how they invest and a platform to easily invest with as little as $20 using your momo.
Conclusion
In the long run, the best time to sell your stocks has a lot to do with whether you have developed the technical know-how, patience, and mindset towards knowing the best times. Happy trading!
