As important as when to buy stocks is understanding when If you’re investing in a business for the long term and you would like to build up a huge position over time and simply collect dividends, then you’ve got to set mental boundaries to not sell that inventory regardless if it drops a couple of bucks here or there.
What about the stocks you are not planning to hold What about these cheaper more volatile stocks you are expecting to make a trade on and earn some additional cash from?
Through the Years I have seen tons of great companies such as I don’t know what is more dreadful, watching the stocks drop initially or seeing them return higher than previously after you sold them. Sadly, most individuals do encounter the latter when in actuality, they need to be purchasing more on a big dip in the purchase price.
You don’t need to experience this. If you know you are Going to have a stock for an indefinite period of time, then mentally prepare yourself to hold no matter where the cost goes, unless it is obvious the company is going bankrupt, in which time it is probably too late. When it is a well-known, family name, then the chances of this are extremely unlikely and a fall in the price is an chance to buy more.
- Determine your exit price before deciding your entry price.
Your entry cost is the price of the stock that you wish to get it at. To put it differently, you decide upon a price to sell where offers you a profit you’re going to be content with no matter if the stock goes higher or not. Sure, you can sell your shares after you’ve got a $1 gain. However, you likely will not be content with that. At exactly the exact same time, it is unrealistic to believe the stock will go up forever, so you’ve got to discover a sensible price to sell where provides a satisfied profit. - Make your exit price fair. Often times
I have friends who get to a stock and then when I ask them what they are hoping to sell it in the cost is just way too large. It’s great to be optimistic, but unrealistic optimism may result in a harsh reality on the market. If you are hoping to sell your stocks in a business at a price 10% greater than the price you bought it in within a couple weeks, you might want to reevaluate your exit cost as this might be rather high for that inventory rather than realistic. I personally really don’t want you to be holding a stock for an elongated time period and it never come near the price you were expecting to sell it at. By way of instance, if a stock that costs $1 billion moves only $.05 cents, that is a 5% movement, which is truly good. - Don’t raise your exit cost thinking the stock will get there. This is quite dangerous. The one issue is whether the stock goes higher or not is entirely beyond your control. It’s far better to lock in profits and miss out on more profits than expect a stock will go higher and lose out on all profits when it does not.
- Be content with any gain. I can not tell you how often I have sold shares of a stock and
made a profit just to see them grow another 5 percent over the next week or so. This happens to all people. And that is okay. You might have lost money. Any money made instantly should make you thankful. Sure, you might have made more money, but treat it as a learning experience for next time and how you may choose to hold the stocks a bit longer or sell just part of this position. Any profit is far better than a loss, whatever the profit might have been.