gtl remodeling building a second storey fox river grove diamond remodeling build an extra room in your house deerfield modular master suite addition .. Chicago Drug testing

Stock Market Investing: Knowing When (and when not) to Sell

One of the greatest challenges of investing in stocks is developing a "sell discipline". Some of the most adept investors struggle with the decision of when to sell.

First, recognize that there are no absolute formulas to tell us to sell at precisely the right time. Instead, we'll need to consider a bundle of factors such as the investment's characteristics, the broad economy, and your own needs, with an eye to market trends. The answer will come from some combination of these hard-to-quantify characteristics.

If you'll need cash soon, for whatever reason, you should be more ready to sell, especially if a stock becomes less of a sure thing. Similarly, if the economy is weak, we might be more motivated to take profits (or even losses) in stocks which are sensitive to economic swings, while a strong economy might allow us to hold tight.

Most important, however, is the intrinsic value of the stock itself. A simple rule plays out here: buy when a stock is under-valued (when the stock sells for less than its intrinsic value), and sell when it is over-valued (priced above intrinsic value). The trick is measuring intrinsic value, which can be done many different ways. We'll talk about measuring intrinsic value more at another time, but regardless of how we measure it, we had to have an idea of what the company was actually worth when we bought it. So, if we reach that target, we can start thinking about taking profits. It isn't always necessary to sell out immediately, though. For a pure value stock, we should sell somewhere in that range, but if the company is expected to grow, we can wait longer and take advantage of that growth. Perhaps, as a rule of thumb, wait until the stock reaches a price double what we think it's worth. Of course, this is a personal decision, too, and depends on how patient you are, and how much you have invested. At this point, the "easy money" has already been made.

Market Trends. It is our firm position that market trends alone should never lead to buying or selling a stock. However, if we've already decided to sell, trend indicators, used carefully, can enhance profits. For example, if a stock is in a solid uptrend that shows no signs of slowing, it may be profitable to wait for the stock to approach a short-term top before selling. Beware that you don't hold too long. Better to sell early than late. Eventually the market will catch on to reality, so if your evaluation of the stock is right, the risk of holding on too long can be far greater than the small benefit from holding out for that extra dollar.

A few other errors to avoid:

Don't avoid selling because you're emotionally attached to a stock. Circumstances change over time. There's no reason to beat yourself up over it. Just dump the loser and move on.

Don't sell when panicked. Panic is an emotional response, and usually wells up when things aren't going your way but you can't tell why. Know why you want to act. Until you can make a judgment about why to sell, it's probably best to hold on and wait out the fear.

Don't sell when worried. In many ways, worry is similar to panic, if a bit milder. It is still an emotion, and one that should be controlled. Stocks are often said to "climb a wall of worry", which means that they will ease upward through difficult times. When news is worrisome, but not devastating, the only remaining catalysts are good things, as all the bad news has probably already been factored in by selling among the worrywarts.

Don't sell when bored. Just because a stock isn't moving doesn't mean it was a bad selection. It may just indicate that you're smarter (and therefore earlier) than the market hordes. If you're still convinced it was a good choice, hold firm and wait for everyone to catch on to your wisdom. Especially with value stocks, it can often take a year or longer before the mainstream recognizes a good stock, and that's when the price will start moving. Patience is a virtue.

In the end, every selling decision is a personal one, and must balance out all the factors we've mentioned. The most important rule, of course, is to sell when it benefits YOU.

To send comments or to learn more about Scott Pearson's Investment Management Services, visit http://www.valueview.net

Scott Pearson is an investment advisor, writer, editor, instructor, and business leader. As editor and publisher of Investor's Value View, a national investment newsletter, he provides general money tips and investment advice to readers, and demonstrates a special knack for locating the up-and-coming stocks in the burgeoning high-tech industries. As President and Chief Investment Officer of Value View Financial Corp., he offers investment management services to a wide variety of clients.

In The News:

Mid-Cap Stocks: Asset Class with an Identity Crisis

Much like the middle child, mid-cap stocks have long struggled... Read More

A Stock Market Investment Plan that Never Lets You Down

The bulls and bears of the stock market are both... Read More

Shadow Bull

As one of my regular readers you know I have... Read More

Ignore Stock Market Talking Heads

You should ignore analysts on TV, the radio, the newspaper... Read More

Struggling Stocks, Booming Commodities

04/28/2005NASDAQ dropped -12.5% year to date in 2005. S&P500 index... Read More

Complacency

During the month of January the Dow Jones Industrial Average,... Read More

Is Active Trading The Answer?

One of the main reasons many of us get into... Read More

Hill of Hope

Just about now everyone is confused as to which way... Read More

Mutual Funds: The Modern Den of Thieves!

Mutual funds were created with the idea that one person... Read More

Money, Insanity and Wall Street

Money: the most charged word in the planet. It means... Read More

Buying New Issues

Has your broker been calling you recently with the "great... Read More

Economists

In today's volatile and confusing stock markets everyone is searching... Read More

Performance Funds

Mutual funds are doing more and more to discourage investors... Read More

Trading Systems

To become a successful trader you must have some kind... Read More

Mousetrap

The spring-loaded rat catcher is the ultimate low-tech device invented... Read More

How (NOT) to Buy Mutual Funds

When it comes to mutual funds, there is a lot... Read More

How to Make Big Money Safely in Stock Market

(1) Stock Market is Tough Place to Make Any Money... Read More

The Exclusive Club of Large Caps

Picture one of those clubs where only the real heavyweights... Read More

The 401(K): How The Insider Has Stolen Your Retirement!

Mutual funds were moderately successful in creating a presence in... Read More

What is the Most Important Indicator of All?

Most stock market traders have a favorite technical indicator.The one... Read More

The Top 10 Reasons to Invest in Mutual Funds

Everyone who follows the financial news has heard of mutual... Read More

Being Wrong Buying Stock is Okay

Being wrong is OK, but let's not carry it to... Read More

Market Psychology

Today we are inundated with tons of information about the... Read More

Time Out

Are you paying any attention to your retirement savings? Do... Read More

Again With the Bubbles?

A few years back ? it seems like an eternity... Read More

induction low bay light led vs induction street light Pete's produce ..
induction low bay light led vs induction street light Pete's produce ..