Stock Investing Hub ⮞ When To Sell A Stock ⮞ 3 Mistakes Investors Make When Selling A Stock
3 RESOURCES
⮞ Introduction
⮞ 3 Mistakes When Selling A Stock
⮞ 3 Reasons To Sell A Stock
3 Mistakes When Selling A Stock
When we are investing, there are bound to be times when we are tempted to sell a stock.
We previously established one simple fact - that you can never time the market.
And in this section, I will be sharing with you some of the worst reasons to sell a stock, and how you should approach your investment decisions instead.
The Price Have Fallen.
This is one of the most ridiculous reason to sell a stock, and a sure-fire way to lose money.
Many beginner investors only look at share price - however, seasoned investors will know that it is the fundamentals and valuations of the business that matters.
Remember that in "Power of Entering In Tranches" - I mentioned that I am excited when I see a sea of red, like this one.
The sea of red will always excite the seasoned investor and strike fear in beginner investors.
If we invest in a quality business at a reasonable valuation - we know that chances are that we will do well in the long run.
And even if we picked a wrong stock - the The Power Of Portfolio Diversification will protect us, and we will still make money in the long run.
You should never be fearful of the market and panic sell.
If you ever need to sell a stock, you should refer to the next section where I discuss the reasons to sell a stock in greater detail.
Selling Because Of "Bad" News
You would probably noticed how many times news report saying there will be a correction and most of the time - they are wrong.
Will they be right eventually? Yes, of course.
Its kinda like the boy who cried wolf.
As investors, we want to be anchored in fundamentals, and ask ourselves these questions:
- "Is the business still making money?"
- "Does the business still pass the 8-point checklist?"
Never let news affect our investment decision and we end up trying to "time" the market, telling ourselves nonsense such as:
"The President election is coming, I need to sell my shares because it will most likely drop."
In short, always focus on the underlying business of your stocks - not the news.
In fact, you will be surprised that I don't even read the news when I invest in the stock market - because it rarely helps in my investment decisions anyways.
Selling Because The Price
Went Too High
This is classic - where people somehow "feel" that the stock price has went too high, and it is bound to fall.
As a result - they are thinking about selling their shares.
They will think to themselves,
"Hey, the stock price went too high...maybe I could sell the shares now, and then buy at a cheaper price?"
This is a classic case of trying to time the market.
As the quote goes - "Time in the market, is more important the timing the market."
But there will be times where the company becoming increasingly "overvalued".
Notice my language here - I am saying "overvalued" .
This is why it is so important to determine the valuation of the business using the "Thermostat Method" - so that you know what is considered overvalued.
In the next section, I am going to share with you what are the three reasons you would sell your shares.
Disclaimer: Any securities or trades mentioned in this article is not a buy or sell recommendation, any form of investments have its risk and due diligence is to be performed before any investment.
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