“90% of the people in the stock market, professionals and amateurs alike, simply haven’t done enough homework.”
- William O’Neil
When you talk of shares the only topic you discuss.....When to buy shares? How many people have you heard discussing an equally important topic....When to sell shares? The decision to sell shares is equally important as the decision to buy shares. You may not believe this...but, selling a share may be the most difficult decision you make. It does not matter if you are selling a share at a profit or a loss. If you sell a share at a loss, you have to admit you have made a mistake. If you sell a share at a profit...you always wonder, have you made the right decision? Perhaps you should have waited and sold your shares for a higher profit.
You don't know when to sell your shares? Well, you just keep holding them, even if it is for the wrong reasons. In this article you will learn the 3 reasons to sell your shares. Want to know more on investment planning? We at IndianMoney.com website. IndianMoney.com offers Free, Unbiased and on-call financial advice on Insurance, Mutual Funds, Real Estate, Loans, Bank Accounts and capital markets
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These are some of the common reasons for you to sell your shares.
1. You set expectations and they have been achieved
The smart thing to do when buying shares....Set a target. You can set a target of a profit of 15-20% a year, when you buy shares. You must sell your shares when the target has been achieved. Let's say you have bought shares and they have gone up 20% or more in a couple of months. Your target has been achieved much sooner than you expect. You sell your shares as the target has been achieved or exceeded.
What will you do after selling your shares? Just as the stock markets go up, it comes down. Wait for a correction in the stock market and then buy good quality shares.
2. The shares of the Company you hold have been underperforming
Buying a share to add to your portfolio, is not as difficult as selling shares at a loss. The reason....Selling shares at a loss means you have to accept your mistakes and this can be very difficult. But, holding on to a loss can also be a costly mistake. The first question you must ask....What is the reason for the fall in the share prices? Is it the fundamentals?
Fundamental analysis is getting a better understanding of the Company, the health of the business and the future prospects of the business. You study the annual reports and financial statements of the Company, the advantages the Company has over its rivals and the strength of its competitors.
These are warning signs and you must heed them. You are a long term investor and if the fundamentals of a Company are not intact, its best to sell the shares, even at a loss. With the money you get, you can invest in shares of Companies with strong fundamentals and make a profit in the future.
When it comes to shares, past performance is no guarantee of future performance. But...you just cannot forget the glory days. The days when your shares were giving great returns. When it comes to shares, emotions like hope, fear and greed can be very dangerous. Get rid of the “It’ll come back” mentality. If something is wrong with the fundamentals of your shares, they will never regain their former glory days.
If you hold on to shares of companies with poor fundamentals because of emotions like hope, you will lose the opportunity to invest in shares of good companies.
Finally....One of the best reasons to sell your shares? You need money badly. You have a medical emergency in the family or you are in a loan trap? You got to sell your shares. What can be more important than the well being of your family? Be Wise, Get Rich.
Mr. C S Sudheer is the founder and CEO of IndianMoney.com – India’s largest Financial Education Company. He started his career with ICICI Prudential Life Insurance and later on worked with Howden India. After his brief stint in Howden India, he moved on and incorporated Suvision Holdings Pvt Ltd which is the sole promoter of IndianMoney.com. He aims to build a nation that is financially literate with investment savvy citizens.
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