It can be difficult to know when to sell a stock. It can be even more difficult to know when to sell a winning stock.
Selling is a numbers game, just like buying. There is always a point in which you should sell a stock. This point often depends on the stock performance and the company.
For example, you have a stock that has performed very well in your portfolio. You are debating simply taking your profits or waiting a little longer until you know whether or not the stock has peaked. What do you do?
There are signs that indicate the direction a stock is about to take. Start by looking at the company. If the company's data - sales, cash flow, revenue - begin to show signs of trouble, it could mean that something has changed with the company that will eventually affect the stock price in a negative way.
If the company is beginning to cut or eliminate dividends, you should reconsider your investment. Dividend cuts are usually a signal of financial difficulties.
There is no reason to wait for a decline in revenue or a market panic to unload a stock. You can go ahead and sell while you have a healthy profit. After all, that is the idea in investing - a profit.
Just like setting a floor on a stock price to sell once it falls below a certain level, you can set an upper limit on a stock. The idea behind the upper limit could be that you are afraid that a stock won't be able to stay above a certain price level. The slightest bump could send the price into a nosedive. You believe that this is the absolute highest the stock could go.
Or perhaps you are just looking to make a certain return on the stock. Once you have hit that level, you will be ready to move on. After all, you want to buy low and sell high.
There are events that can predict the fall of a stock. Watch for your stock becoming increasingly popular in the media. This isn't always a good thing. The popularity may lead to a frenzy of inexperienced investors who bid up the price. Once the hype dies down, the market will collapse. There is a chance that the price could fall below your profit level.
You can also keep your eye on the growth of the stock. Growth stocks grow, it is what they do. When they start to slow, or even stop growing, you should move on. Growth stocks that aren't maintaining their growth are not generally a good investment.
If you don't want to sell out, just take part of your profit out of the stock. You could sell back down to your original investment, taking the profit and letting the rest grow. You have made your profit and have secured it. If the stock starts to slow or show signs of failure, you can then sell it all. If it happens to go down a bit, you haven't lost your entire profit.
There are always good deals on the stock market. If you look around, chances are that you can find a better deal with less risk. Just because you are currently happy with your investments, doesn't mean that you should stop looking for good investment prospects.
When to sell is an art, just like buying. Sometimes it is beneficial to sell a stock when it is still at the top of its game. If you wait, you could lose your profits.
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