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How to Know When to Sell Your Stocks

While quite a bit of time and research goes into selecting stocks, it is often hard to know when to pull out – especially for first time investors. The good news is that if you have chosen your stocks carefully, you won’t need to pull out for a very long time, such as when you are ready to retire. But there are specific instances when you will need to sell your stocks before you have reached your financial goals.

You may think that the time to sell is when the stock value is about to drop – and you may even be advised by your broker to do this. But this isn’t necessarily the right course of action.

Stocks go up and down all the time, depending on the economy…and of course the economy depends on the stock market as well. This is why it is so hard to determine whether you should sell your stock or not. Stocks go down, but they also tend to go back up.

You have to do more research, and you have to keep up with the stability of the companies that you invest in. Changes in corporations have a profound impact on the value of the stock. For instance, a new CEO can affect the value of stock. A plummet in the industry can affect a stock. Many things – all combined – affect the value of stock. But there are really only three good reasons to sell a stock.

The first reason is having reached your financial goals. Once you’ve reached retirement, you may wish to sell your stocks and put your money in safer financial vehicles, such as a savings account.

This is a common practice for those who have invested for the purpose of financing their retirement. The second reason to sell a stock is if there are major changes in the business you are investing in that cause, or will cause, the value of the stock to drop, with little or no possibility of the value rising again. Ideally, you would sell your stock in this situation before the value starts to drop.

If the value of the stock spikes, this is the third reason you may want to sell. If your stock is valued at $100 per share today, but drastically rises to $200 per share next week, it is a great time to sell – especially if the outlook is that the value will drop back down to $100 per share soon. You would sell when the stock was worth $200 per share.

As a beginner, you definitely want to consult with a broker or a financial advisor before buying or selling stocks. They will work with you to help you make the right decisions to reach your financial goals.

News below might help you a lot:

Stock markets losing Rs 100 cr per minute in 2011

NEW DELHI: Bear run at stock markets is costing investors dearly, with value worth over Rs 100 crore on an average being eroded in every single minute of trade so far this year.

In total, the stock market wealth has come down by a whopping over Rs 11 lakh crore since the beginning of 2011, as the benchmark Sensex plummeted by over 3,000 points.

The total average loss for every investor also stands at a staggering amount of Rs 10 lakh, taking into a total of little over one crore investors present in the market.

The Sensex has come down sharply from 20,509.09 points at the end of 2010 to 17,463.04 points at the end of today’s trade.

During the same time period, investors’ total wealth, measured in terms of cumulative value of their holdings in all listed stocks, has plunged from Rs 72,96,725.79 crore on December 31 last year to the current level of Rs 61,94,190.42 crore.

While we are in the second month of the year, there have been 28 days of trade so far in 2011 after taking into account the holidays. On these days, the trade has been conducted for a total of 182 hours or 10,920 minutes, as markets remain open from 9 am to 3.30 pm only.

Taking into account a total of about 182 hours of trade during these 28 days, the average loss for investors has been Rs 39,376 crore in every day of trade.

At the same time, the investors have lost an average of Rs 10.96 crore in every minute of trade, while the per-second loss works out to be about Rs 1.6 crore.

There are about 1.9 crore demat accounts in the country, but the total number of active stock market investors are estimated at little over one crore, after taking into consideration the inactive accounts and the fact that some might have more than one account.

Accordingly, the average loss for every investor would be more than Re one for every second of trade, while the cumulative average loss for every investor so far in 2011 stands at over Rs 10 lakh.

However, there are some investors, mostly promoters, whose market value loss of whose stock holdings runs into thousands of crores. The cumulative loss for all the promoters together is estimated at about Rs 6,00,000 crore so far in 2011.

On the other hand, the market value has come down by an approximately Rs 5,00,000 crore for all the other types of investors, including mutual funds, other domestic and foreign institutional investors, HNIs and retail investors.

Source: IndiaTimes