What's the Right Time to Sell your Invested Stocks? There is always confusion surrounding the trading of stocks and henceforth, investors become cautious while making a decision

By BusinessEx Staff

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Investment is an important means to earn a reasonable amount of money by just studying the company's performance and betting on its stocks. Once you have a stake in the high-yielding company, your portfolio gets flooded with dividends and profits this is a common perception of investors who begin trading in stocks. However, there is another side of the coin which alludes that profits can be made by selling the stocks too.

What's the Right Time?

In essence, there is no hard and fast rule about buying and selling the invested stocks. One just needs to dig out the opportunity in the ever-changing stock market and consequently make a decision to either procure stakes or sell them.

Investors commonly reiterate that there's a right time (for selling or purchasing the investment).

Actually, ascertaining the right time for selling the investment is a bit difficult since one has to assess the financial balance sheet of the invested company, compare the market and accordingly make coherent decisions. Even after calibrating valuation of the investment, investors often make wrong decisions while trading in stocks and thus, make blunders which can't be undone.

The renowned veteran investor, Warren Buffett, advises the investors that they should not move around the market as it is not a smart way of investing.

"They (investors) think that because you can trade you should trade. But you buy a farm, you buy an apartment house — you can't re-sell it tomorrow," CEO of Berkshire Hathaway, Warren Buffett told the international news daily, Yahoo Finance.

"The costs of [trading stocks] are pennies compared to other kinds of investment activity. So, because they can so easily move around, they do move around. And moving around is not smart in investing," Buffett added.

With this remark, Warren Buffett brings focus on the timing of the investors as to when stocks should be bought and when stocks should be sold in the market.

When to Sell your Investments

There is always confusion surrounding the trading of stocks and henceforth, investors become cautious while making a decision. For assisting the investors, here are some expert advices as to when the investments should be sold.

1. Investment no Longer Remains a Fit

To become a pro-investor, it is crucial to maintain your investment portfolio. Ideally, a portfolio should have a large number of investments, ranging from stocks to mutual trust funds. Maintaining the diversity of assets is vital and, for that, the investors should dispose of undervalued assets. So, if the stocks become an undervalued asset then the investor should sell his stake early.

2. Sell when Investments Appreciate

Investors which follow the rule of value investment generally invest in undervalued stocks. Undervalued stocks leap down from their actual valuation owing to enormous reasons but this phase is temporary as the stocks go up if the company has to perform better.

So, the investors who buy undervalued assets and possess it for a time should sell the assets when stocks begin appreciating. Nevertheless, appreciation indicates that it's the right time to sell the stocks and earn some profit.

3. Cash Flow goes Negative

Cash flow is one of the indicators of a company's performance. While investing in a company, the investors determine the cash flow of the firm and accordingly take a decision.

So, if the invested company has a negative cash flow then the investor should dispose of its stakes early. By doing so, the investor will be saving himself from losses.

The aforementioned suggestions inform the right time for selling stocks. The first-time investors should follow these suggestions religiously.

This article was originally published by Jaspreet Kaur.

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