WHEN TO SELL A STOCK FOR DUMMIES
Buying stocks for the first time is easy once you learn how to do it. You open an account, send money in, and then you are ready to trade online. That is the easy part and then you have to tackle the harder decisions of what stocks to buy, when to buy them, and when to sell them.
Picking the right stocks to buy and the right time to buy them is harder. How to find good stocks to buy online can be a lifelong learning experience because to do it properly, there is so much knowledge needed and so many variables at play. Some people rely on their in-house stock broker, others watch television and do what the “experts” tell them to there, and still others do their own analysis. Many people end up buying what their gut tells them to and leave it at that. The Dow Jones is full of all kinds of investors with all sorts of different opinions.
Figuring out what stocks to buy and when to buy them may be hard but it pales in comparison to figuring out when to sell a stock. This is where the mind plays tricks on you and there is no one way or right way to make this decision.
For instance, I bought AAPL at $189 several years ago right before the market started falling apart. I had hoped to see it go to $210 or so and then I was going to sell. That never happened and the stock proceeded to work its way down all the way into the $80′s before I could seemingly blink an eye. It was a rapid deterioration and everyday I wondered whether I should sell. Deciding not to sell and to ride things out, I then happily watched as it worked it’s way back up to about $150.
Again, every step of the way I could have sold on the way up and taken the loss but I held on. At about $150 I did decide to not press my luck and I sold the stock for about a $38 per share loss from the time I bought it. Not great but sure better than if I had bailed out in the $80 range. Now though, the stock has continued to go up and is now just several points away from where I bought it. Although I am happy to have gotten most of my money back, I am upset that I didn’t wait longer to get all of it back.
This is typical of every decision you make on when to sell a stock. Selling stocks for dummies is what you feel like because almost always you end up doing the wrong thing. If you sell the stock too soon, you become upset that you didn’t stick around for the further gain. If you wait to sell hoping a stock will go up further and it then goes down, well of course then you are upset you didn’t sell when you where thinking about it.
Some people try to take all emostion and thought out of the selling process and they trade stocks using trend lines. If you use this method, you probably won’t have to deal with the emotional anguish of making a buy/sell decision but then you won’t be doing any stock analysis either. This is probably a method that beginners should not try and should be left to those who have studied this way to make trades.
Unless you can tell the future, and none of us can, the only thing you can do is to sell your stocks when you feel like it is time. If you have a gain and you are happy with that gain, maybe it is time to sell. If you have a loss and you feel real uncomfortable with that loss, perhaps it is time to think about selling. Unless you are a super stock analysis guru who has access to tons of financial data and the ability to understand that data, I have found it is best to do what your heart tells you and then step away.
If selling a stock will make you happy, then sell. If you are comfortable waiting to sell a stock, then wait to sell it. There is no one correct answer and there never will be. Also, paying tax on stocks is something that you should never let influence your buy and sell decisions. Figuring out the right time to sell stocks is much harder than figuring out when to buy. This is because you don’t have any loss or gain to deal with and you have no vested interest in anything until you buy it. Once you buy it though, it is your stock and the decision of when to sell a stock can be excruciatingly difficult.
