4 Tips for Selling Stocks

Wall Street, Frankfurt, London and Hong Kong are among the biggest stock markets in the world. They are the battlefields of modern wars, fought with economic terms instead of weapons. CNN, BBC and CNBC are some of the television channels that dedicate precious airing time to give us the latest updates for what’s happening in the world of business and finance.

We have watched countless videos of Wall Street traders shouting, appearing as if they are fighting with each other. While an everyday person outside the financial world would think that these traders are arguing, the reality is totally different and much simpler. More specifically, most of those videos are now a thing of the past, since computers and networks have taken over and changed the nature of trading. 

Back in the old days, traders were shouting, buying and selling shares. Now, most of these actions are performed with computers. Billions of shares change owners every day, with decisions made in the blink of an eye. Buying some shares is a relatively easy procedure, but what if you own shares and you want to sell them? Which are the main criteria that will lead you to selling your shares on the right time?

This article will give you some basic tips on how to act when you consider selling some of your shares. The prerequisite is one and only: You must have a clear mind and take the sale seriously. Remember, shares cost money and, since we are talking about your portfolio, we are talking about your hard-earned pounds, euros or US dollars, which have been transformed in pieces of paper representing part of a company. Nobody wants to lose money and we don’t believe you want to break this rule.

Tip no1

By now, you know perfectly well that share prices have their ups and downs. If you have your priorities set and already did a thorough research, you may have the opportunity to buy shares of growing companies in relatively good prices. After all, this is what makes a good trader. However, not being a professional trader means that may have to take a “trial and error” approach. Trading, buying and selling, requires common sense. We suggest that you sell your shares when the valuation is high. Be in alert because when the price of a share reaches a high level, it’s very easy to collapse and you may find yourself in a difficult situation, being too slow to react to the market’s call. 

Research, experience and a bit of an instinct may save you. At this point, we suggest you have your eyes open for the price to earnings (P/E) ratio of your stock. If this ratio is far above the average, it may be a good time to consider selling. Usually, tech companies, such as Facebook, have a high P/E, which is very attractive to traders. However, it requires your constant attention because things can get ugly very quickly and you can lose money. It’s also important to check out companies with a low growth rate, but having a high P/E you might be able to find a golden nugget there. 

Tip no2

The stock market has its ups and downs. A smart investor should be able to recognise when the moment is right to sell his/her stocks, just before an economic downturn. Of course, it’s not only about how smart is someone, because experience and knowledge are vital factors and can’t be replaced easily by instinct. Negative events and news are usually the drivers of a declining market. 

As it happens in real life, negative news create anxiety and can affect your mood. Since shares mean money, one can imagine that an unfortunate event can affect the value of a share. Investors are very cautious in this kind of situations. People who have entered the market by buying stocks with a short-term plan are keen on unloading their portfolio, when they understand that the market is on negative territory. On the contrary, investors with a long-term plan tend to keep their stocks, even in hard times, without hesitating to face the consequences. Sometimes this will work out, other times it won’t. It depends on what kind of a plan you had when you bought your shares. Our piece of advice is to read carefully the market and exit it before you feel that a downturn is imminent. 

Tip no3

Sell the stocks when you are sure that they won’t be able to offer you more profit or when you think that they have done their part in your financial investment plan. Your plan should have targets, regarding the profit and the losses you can handle for a certain stock. The stock market isn’t “solid,” but imagine it as “liquid” with rapidly changing conditions that can turn your profits into losses very quickly and vice versa. 

If you bought a company’s shares and you have reached your profit target, perhaps it would be wise to consider selling it. Especially, in the case of your profit being more than anticipated, which means conditions favoured the spike. As you know, this won’t happen often and luck is, sometimes, a basic factor. We suggest that you take a good look at your portfolio and, if you find it appropriate, sell the specific stocks and move on to new endeavours.

Tip no4

Asset allocation is one of the standard things that experts advise new investors. Asset allocation means that you don’t put all your available funds in just bonds or just stocks or a mutual fund. Supposing that your investment portfolio is formed based on asset allocation, selling some of your stocks may help you rebalance it. 

Some of the most seasoned advisors say that the asset allocation may get imbalanced if one part of the portfolio outperforms another one. With bonds being a bit more stable, shares are the usual suspects in this case, with their values going up and down multiple times in a week’s time. Looking at your portfolio, it would be a good idea to not allow it being focused on one asset. Selling the extra shares will get you balance and some profit that you can use as you wish.

Selling a stock requires good timing. Our people at Currency Solutions are all about the right timing and are ready to reply to any of your questions. We offer the best exchange rates and the speediest transfers available in the market. Just give us a call or go through our website for more information.