10 Reasons for Selling

During your career to invest, you will find these two transactions do buying and selling. Buying requires knowledge of the fair value of a share and then compare it with recent price. If the recent share price is 10% below market value and an investor does not mind a return of 10%, then he has to buy the shares. If not, he can go to other files.

However, selling is not as easy. Sometimes the investment is not the way you want to go. Your prediction may not be accurate. Moreover, your time frame longer than you expect. Here are ten different reasons investors would sell common stock:

Need the money. This usually happens due to improper planning. However, things happen. Even the most carefully planned strategy is not working. Catastrophic events such as Hurricane may force investors to sell as his household is affected by it. An investment Katrina or Rita

The book is unclean. If management abruptly left their post or the Securities Exchange Commission (SEC) to conduct a criminal investigation on a company may be time to sell. Your assumption may be inaccurate as a lot of calculating the fair value is based on the balance sheet of the company, cash or other financial statement issued by the management.

Acquisition News. If any of your stock account is being bought by other companies, it may be time to sell. Sure, you might of the acquiring company, but you still need to figure out the fair value of the ordinary shares of the acquiring company. If the acquiring company is overvalued, then it is best to sell. A good example would be the purchase of Time Warner by America Online (AOL) in 2000. At the time, AOL stock price way overvalued with price earning ratio of 100.

Taking profit from the table. Your stock has risen 40% of your purchase price. Your calculation of the fair value indicates that the proportion may rise 10% more. Should you sell? Sure. After all, the goal of every investor is to make money. If you feel you need something from the table, then get by all means do. I'm not naive and assume that you have to wait for the share price to rise 10% more. Remember that the stock price goes up and down and that the fair value calculation has a degree of uncertainty. Want your 40% profit for an additional 10% risk return? I probably would not.

Other Investment Opportunity. Let's say you bought stock A and it has risen to 10% below market value. Meanwhile, you had B stock dropped to less than 50% of the calculated fair value looked. This is an easy decision. Go on! Sell ​​your stock A and buy shares B. Our goal as an investor is to maximize our investment. Sacrificing a 10% return in order to acquire a 50% return is a sensible way to do that.

Inaccurate Fair Value Calculation. Let's face it. People make mistakes. As investors, we sometimes mistakes in our calculation of the fair value. There are factors that we could not take in the accounts when examining a particular company. Thus, Merck & Co. Inc. have a higher market value if we dismiss the potential Vioxx liability that some say as high as $ 50 billion to be. But doing further research, we know that Vioxx liability exists.

New competitors with better products. When new competitors have emerged, would the company that you have to spend more money to fend off competition. Recent example is the emergence of pay-per-click advertising through Google. If you're in the advertising industry, such as newspapers or cable network, this new product from Google hurt your profit margins and ultimately the fair value of the stock.

Exodus of talented employees. Talent is an asset. However, it seems not recorded on the balance sheet of the company. Companies that rely heavily on intellectual products need to keep their employees. Satisfied They are valued assets. If employees defective, it will affect future profits of the company. Lower future income means lower fair value of the ordinary shares. A recent example are several key Microsoft employees defect to Google.

Not having a valid reason to buy. If you do not know why you bought a particular stock, you will not know how much your potential return or if you have to sell. This is the easiest way to lose money. If you are not a valid reason to buy, you should immediately sell.

Stock Achieved Fair Value. This is the simplest part of the problem. Yes. We have to sell when a stock reaches its fair value. It is the main reason why we chose to buy it in the first place.