Knowing when to sell a winning stock is one of the most difficult decisions you’ll have to make as a stock trader. After all, buying a stock is only the first step in your investing journey, and you want to make sure you’re maximizing your returns and making smart investment decisions.
When you’re a successful stock market investor, it’s easy to get caught up in your emotions. You want to know how much more you can get out of it. You’ve worked hard to find a great stock that’s paying off, so why should you give it up? Let’s say you bought a stock in a dairy company at a good price. The dairy business is doing great and the management has high hopes for the future. After two years, you’ve made up to 200% of your money. You’re so happy! But when a stock like the dairy company here becomes a huge success, it can be hard to keep your emotions in check. (You’ve been there, right?) So what should you do? Well, the answer is pretty much the same: it depends.
During these times, do not succumb to temptation or make irrational decisions. Instead, ask yourself the following three questions before closing a big win:
Is your original investment case still true?
Is the price of the stock fully priced?
Is the stock price meeting your investment objective?
Wise man aka Warren Buffett said, “if you don’t want to own 10 years of a stock, don’t even want to own 10 minutes of a stock.”
Remember that selling stocks is okay, as long as you’re doing it for good reasons.
Don’t sell a big winner too soon or too late
Choose mind over money!
