When to Sell

 

When does an individual sell a stock  for a profit or a loss?

 

 

Selling for a Profit:      



An old adage on Wall Street is that no one goes broke selling for a profit. Historically speaking the stock market in the United States has returned an average of 10.4% from 1900 to 2000. Individuals should never be out of the market totally. Because their is no one in the world who can successfully call the top or bottom of the market. When markets are selling at premiums you want to sell into the greed of other investors. When an individual is selling a stock, mutual fund or index etc... one has to look at the specific investment at hand and determine if the investment is selling at a premium. If a investment is selling at a premium the investor should consider selling a percentage or all of a investment. Also the investors risk tolerance has to be accounted for and the volatility of the investment.  Volatility is the measure of price variation. The more volatile the stock the higher the variation in stock price  (Coca Cola's stock is less volatile then Tesla's stock).  Another key factor to consider is that Coca Cola pays a quarterly dividend. According to Warren Buffet you buy great companies at great prices and you sit on your hands. And remember cash is king in economic downturns.

 

 

 

Selling for a Loss:

Warren Buffet has two rules: 1. never lose money 2. never forget the first rule.  Investors don't invest to lose money, but when an investment is occurring loses the investor has to make tough decisions on selling or holding tight.  Investors spend 90 percent of their time looking for investments to buy and 10 percent deciding when to sell investments. When an investment keeps losing money and the  management of the company continues to make bad decisions then it is time to sell.