Pratibhuti

Why and when to sell a stock

Every investor invests in a company with the common idea of getting a good return on investment. The market’s red indicator scares us and we end up selling stocks only to find out that they rose later.On the other hand the green indicator motivates us to hold on to the existing stock and invest more in the same, leading to probable losses if the stock falls.Unfortunately, basing our decision on stock prices isn’t the answer to buying and selling.

Study the company’s expected growth

Study the history of the company and check its financial stability. Make sure the company hasn’t suffered any major setbacks in the recent past and is still going strong.If the graph shows a gradual rise, don’t be in a hurry to sell the stock.

Sell non-performing stocksIf you have invested in random stocks based on people’s opinions and haven’t applied any method of buying, sell those stocks first.There is no point holding on to the wrong stocks which won’t give you a good return.Instead bear those small losses, invest in promising stocks and recover the loss sooner.

Low liquidityWhen you find that you don’t have enough liquidity or spare cash to invest in good stocks, sell off the low performing stocks and use the money to invest in better, promising ones.

Study the P/E ratioMake sure the price to earnings ratio is low. A low ratio means the stock is underpriced and has good future value. However, a high P/E ratio isn’t always a bad thing. It could probably have decreased over the years and the company has good future prospects.Nonetheless, if it is high, compare it with the P/E ratio of its competitors. If it is abnormally higher than the others, its time to bid farewell to those stocks.

Pratibhuti

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