Should I Sell My Stocks Now? 5 Good And 4 Wrong Reasons On When To Sell Stocks

You should always invest with an end goal in mind. It could be something as long-term as retirement. Or it could be short-term as your kid’s college education.

When picking individual stocks, you could often run into issues where your original thesis proves to be wildly incorrect. Fraud is the most common example. Wirecard was a German-based payments processor. Around April, allegations of fraud started circulating. Accounting irregularities are a huge red flag for me. After all, we all know what happened to Enron. It is always better to exit the stock rather than hold and watch it go to zero in such cases.

Often you might find other asset classes become relatively cheap to their intrinsic value. Although we have talked about investing in real estate with little or no money, some of the strategies do require funds.

Taxes eat up a large chunk of your hard-earned money. Effective tax planning strategies are the key to reducing your overall taxable income.

Tax Planning Strategies

When Not To Sell Stocks

We are often bombarded with noise which makes us second guess ourselves. We deviate from our investment plan and succumb to the siren song, wondering when to sell stocks. Let us explore four wrong reasons for trading stocks.

Based On Forecasts

No one has any idea how the stock market performs daily or even on a long-term basis. And that includes experts who have called past bubbles. Legendary investor Jeremy Grantham renewed his warning to investors that the stock market is in a “fully-fledged epic bubble” in a letter titled “Waiting for the Last Dance.”

Many in the investment community love Warren Buffet. After all, he appears to a friendly wise grandpa with lots of wisdom. However, his track record for the last 22 years has been dismal. Berkshire Hathaway has underperformed the S&P 500 by 54% over the previous 18 years.

Value investors love to tout the Price/Book ratio as a method of finding value stocks. The word value is enticing. After all, we consider ourselves value investors, not overpaying stocks. However, there is a reason for value stocks to be cheap.

How Should You Invest? Humans are wired to pay more attention to bad news. As a species, our ancestors needed to survive every day from predators much more gigantic than them. Not paying attention to bad news; could be the difference between being stomped down by a mammoth or eaten by a lion.

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