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 When to Sell the 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.
When to sell the stock
- 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.
- 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.
- 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.
- Another time to exit the stock is when the Financials Goal is Realized or in near-realization by the Investor. 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.
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.