In our last lesson, we looked at a 5-point checklist you should consider before buying a new stock. The goal there was to make sure your new stock passed ALL five points before being admitted to your portfolio.
Today, we’re going to look at the other side: When should you sell a stock in your portfolio?
Too often investors look at their own gain or loss as the sole deciding factor in when to sell.
It’s important to remember that your personal gain or loss on a position has nothing to do with the future prospects for the company. The stock is a good or bad investment regardless of how much your personal position has changed in value.
This checklist is different from the “when to buy” checklist in one important way:
When using the 5-point stock buying checklist, you should be able to answer, “Yes”, to ALL five items before buying the stock.
However, with the stock selling checklist, you can sell a stock anytime you answer, “Yes”, to ANY of the questions below.
Unlike buying a stock, you don’t have to satisfy ALL the different possibilities below. ANY one of them is reason enough to sell the stock and move onto something better.
As usual, this isn’t a fully exhaustive list of reasons to sell. But we believe it covers all the most common and important cases.
We’ve provided a “Stock Seller’s Checklist” handout that summarizes the points below. We recommend you read the full write up below and then download the checklist for your future reference.
The first item we'll cover is our #1 reason to sell a stock, and frankly, way too many investors overlook it. If you originally bought a stock for...
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