when to sell a stock
We all know that a stock cannot go up forever, and this is why you need to know as an investor when to sell your shares to make a profit. To help you with that, I have come up with 4 tips that can help you know when you might want to sell shares in your stock.
1. it hits a price target
When we talked about when to buy stocks, we said that one thing to make sure you had was a buy target of when you may want to buy your stock. Similarly, when you own a stock, you want to establish a price target of where you may want to sell your stock. Now, let's say after purchasing your stock, your company has hit your price target, you may want to sell it as there may not be much upside left. This will help ensure that you can lock in gains
2. worsening fundementals
It is always important to stay alert and make sure that the company you own has stable fundamentals. Declining fundamentals are a very good reason to consider selling a stock, and can really harm the company moving forward. Declining fundamentals of a company are usually represented through a decline in sales, profit margins, and cash flow. Fundamentals are one of the most important things in a company, and if they are weakening, you should really reconsider your thoughts on the company.
3. A better stock comes along
In today's world there are always plenty of opportunities in the stock market and often times you will see a better prospects in a company. Whether it is a competing stock that is starting to look like a better option, or a stock in a completely different sector that you need more capital to purchase. Sometimes, there will be a stock that looks more appealing. Often times you won't have the equity to pursue the stock, which warrants the case for you to sell your current stake in a stock, and use the capital to purchase a better stock.
4. A merging agreement
Often times an emerging company will get taken over by a larger company looking to expand its growth and profitability. When you own a stock that is being taken over, the company that plans to take over will often pay a high premium to get ahold of the company that you own. This premium can often be between 20-40%. This means a huge capital gain for you the investor, and can often be a sign that you should lock your gains in. This is because merger deals have historically not done well, causing headaches later on for investors and the company alike.