4 Reasons on How to Decide When to Sell a Stock?

Reading Time: 3 minutes

If the fundamental aspect changes towards the negative side, then there is no point in being invested in that stock. This is one of the thumb rules that tell us when to sell a stock.

how to decide when to sell a stock

Introduction

Timing plays a crucial role in Stock Market. Although one cannot time the market, then also one should be fully aware of buying the stock at a fair price and selling the stock at the right time.

Lessons on Buying the stock can be easily learned or can be researched anywhere. But there is less talk about how to decide when to sell a stock.

Hence in this blog, we will cover certain key points which should be analyzed by the Investor and should make a decision, whether to sell the stock or not.

How to Decide When to Sell a Stock

No Earning Growth Visibility

Whenever the stock is chosen the main things to know are about earning visibility and growth in earnings. If this judgment goes wrong then that is the right time to exit from that stock.

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Deteriorating Financials and Other Fundamentals

If the fundamental aspect changes towards the negative side, then there is no point in being invested in that stock. It happens when the investor invests in that particular stock, company, or sector which is doing well.

The change in earning visibility happens when changes occur in the sectors due to ideation, innovation, and automation, and technology. All these factors are linked to earnings.

This means if growth in earning factor goes wrong then it is time to exit from that company.

When the Cycle Ends

Many times investor feels that till the time an opportunity is available in the equity market, the ideal money which is parked in a Savings Account or a liquid fund should be invested in such sectors where the money will grow steadily with low risk.

This process should only be adopted by the investor when he/she very well knows the cycles of the sector and exits at right time.

For this, you need be expert in that particular sector or the company which investor needs to understand about the cyclicality.

Once Financial Goals are Achieved

Another reason on how to decide when to sell a stock is when the Financials Goal is Realized or in near-realization by the Investor.

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When we invest in stocks or mutual funds we attach the financial goals to these investments.

If that financial goal realization is coming near or else if the financial amount goal is achieved, that is also one of the reasons to sell the stock.

Conclusion

It is better to link mutual funds to financial goals. Normally stock investment should be done with wealth creation ideas.

But the 2 factors to always keep in mind to exit from the company or stock will be if they are having misjudgment in the earnings or else if there is a change in whole sector dynamics then it is better to exit from that stock or company.

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Invest Yadnya

Invest Yadnya

Yadnya Investment Academy focuses on Investor Education, Personal Finance, Money Ideas, Mutual Funds, Stock Market, Investing, and Savings.
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