Photo of Eric R. Ebbert, CFP®, MBA, CEO Eric R. Ebbert, CFP®, MBA, CEO Dec 09, 2020

If you have been paying attention to our advice, you know we are against panic-selling your stocks when the market grows volatile or bears down. However, you cannot hang on to those stocks forever. You need to sell them at some point if you want to grow your wealth. So, you might be wondering then, when should you sell your stocks?

While the answer to this question is ultimately a personal decision, we hope we can help you think through the decision with the following tips.

How to know when to sell stock

Put simply, the strategy for making a profit off stocks is buying them low and selling them when their value is higher. However, reality is a bit more complicated than that. 

For example, when you buy a stock low and the price starts to go up, you might hold out on selling in hope that the price will climb higher. Perhaps it does and you wait further still. Then it starts to dip, and before you know it, the value is less than what you paid for it.

Nobody wants to end up in this situation, so if you are struggling when to sell your stocks, you should consult these tips below and talk with your personal financial advisor.

  • The purchase was a mistake — Perhaps you did some research before deciding to buy a stock before realizing later that you made an error in your analysis. If it turns out the stock was never a wise investment in the first place, you may want to sell it, even if you take a loss. The value of the stock could decline even further, and even if it does not, you need to adhere to the principle of making investment decisions based on thorough analysis, not crossing your fingers and hoping for the best.
  • Prices suddenly spike — A dramatic increase in price may be the best time to sell. Avoid getting caught in greed hoping that the increase will climb even further. Stocks spike for a variety of reasons all the time before dipping again. Any profit is a good profit, and you can only continue growing if you keep making smart investment decisions.
  • Valuation — Valuation is the measure of a company’s estimated future cash flow. There is always a degree of uncertainty when measuring valuation, but it is useful for helping investors decide when to cut ties and sell their stocks.

    For example, if a company’s valuation suddenly spikes higher than its competitors, you may want to sell before it slides back down or before the competition catches up. Additionally, if you see a company is showing the signs of going out of business, such as cutting costs or laying off employees, you may want to sell before the value bottoms out.

Talk to a ProVise CFP® professional about managing your investments

Choosing what you want to eat for lunch is easy. Deciding when to sell your stocks is not. While you might wish selling stocks was as straightforward as picking out your lunch, it will always be a complicated game. That’s why you can rely on the help and guidance of the financial team at ProVise Management Group.

Our CERTIFIED FINANCIAL PLANNER™ professionals can get to know you and your current financial circumstances, goals, risk tolerance and personal values to help you develop a plan that works for you. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.

Are you ready to talk to a professional about your personal financial planning? Contact ProVise today to schedule a complimentary consultation.