6 things to remember before selling your stocks
With stock trading so accessible and so with so many different options among stocks to buy today, nearly everyone from college students to working professionals are trying their hand at the share market. And why not? If you have a pulse of the Indian stock market, know what you're doing and make wise, well-informed decisions, you could stand to benefit.
However, just as properly timed decisions to buy or sell stocks will pay off for you, ill-timed decisions could end up costing you.
With that in mind, here are six things to remember before selling your stocks:
Lower Trading Volume
When you find that a stock is unexpectedly trading at a lower volume than before, it might be a sign of trouble. Stock liquidity - a measure of how quickly a stock can be bought or sold – is a crucial factor if you're wanting to sell stocks that are not performing well. If you're unable to sell your stock for a lack of buyers, you should have to hold on to it and hope the company can get through the rough patch it's going through.
If you see companies cutting back on dividends, or even getting rid of them entirely, it's time to take a hard look into their internal workings. You should be checking the monthly and quarterly performance of the companies that issue your stocks.
Pay extra close attention if a company cuts dividends as it could hint at a more serious event at play. Perhaps, it's a sign of cashflow trouble or other changes or issues that could affect the stock value.
It's great if one of your stocks had a good return, but always stay alert and look for any signs that it might start to decline. There are many such signs and they can often be found in the form of financial ratios.
The health of a company which issues the stock can be measured through a fundamental analysis, which is a close audit of financial statements. Those who know the market well use financial ratios to obtain insights and predict how a company will fare in a given timeframe.
However, since companies keep their financial details closely guarded, the figures used to compose the ratios can be difficult to obtain.
Traders set a floor on a share price so that should it drop below a certain level, they sell it to maintain a profit. You can also set an upper limit that would trigger your sale.
This is because you might be afraid that the stock will have a hard time supporting a market price above a certain level, and that any bad tidings could send the share price into a nose dive. Setting limits on when to sell and when to buy ahead of time can help control your apprehension.
Over time, this practice could end up benefiting you, with higher profits, as you'll be less likely to sell too soon or give in to panic-selling.
Make a habit of consider the bigger picture when you consider selling your stocks. If you have a feel for the market, about things which could affect stock value, you'll have a better grasp of the need to take timely action.
Hold on to some of your holdings
Should you have good profit in a stock, consider selling only a portion of your shares. Reinvest the profits into other stocks that are doing well, and let the others be as they are. This way, you'll spread the risk over a wider range of assets while still profiting. If the stocks you keep begin to plummet, you can always sell them and hopefully come away with some profit.
As stated earlier in our ‘6 things to keep in mind for achieving financial freedom' blog, wise share market investment is one of the keys to financial freedom, and it's never to early to start. When you need to buy some stocks, you can always turn to the mPokket instant loan app to get some quick credit.
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