Stock Market Investment Strategies - when to sell a stock

Lets say you to bought a stock at, Rs 50. You see it climb to Rs 100. The greed in yourself makes you cling onto the stock instead of selling it. And ultimately the stock reaches Rs 40 from Rs 100 in no time, before you can change your decision and sell it.

Investor are attracted to the stock market due to their greed and the sole purpose of making quick money. It makes us think that a rising stock will climb further. But until you sell, the increase in the value of the stock is only on paper.

The decision for the investors to make is to buy the stocks at the right time and sell it when it is at its peak. Even investment analysts and fund managers admit that finding the right time and price is very difficult. Here I present some of the guidelines that can help you in making the decision.

• First off, accept that it is almost impossible to sell the stock at its peak. When you sell, there will always a few more that you could have made. Accept this fact and be happy with the profit you made, as greed inevitably leads to costly mistakes. If your stock takes off then it's time to do a reality check. Is this a reasonable increase because the business fundamentals have improved that much? If yes, keep the stocks and your cool. If not, you're probably looking at a bubble. Get away from this stock immediately. Surely you may think that you didnt make slightly more profit, yet you should feel happy that you didnt have the stock when it will take a beating in the coming days.
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• The best strategy would be this "If you had no shares, would you buy some at the current price? If yes, stay put or buy more. If not, sell and cut back your losses." This should be done at particular intervals of time to re-balance your portfolio.
  
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• Whenever you buy a stock maintain a target price at which you will sell the stock partially or fully. When the target price of your stocks has been reached, taking a selling decision is easy.
  
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• By having a stop loss trigger you sell a stock, not to book profits, but to minimise your losses. A stop-loss sell order is a contingent order that will get triggered only if the stock does fall to a particular price.
  
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• There could be fundamental reasons why you should think of selling the stock that you have long owned. It could be a sudden about turn in the company’s financials or prospects
  
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• Whether it is a bull phase or a bear market rally, there will always be stocks in your portfolio that merit selling or replacing with other options.
  
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• Booking of profits is should be your aim as it leaves you with liquidity, which can be handy when there is an opportunity to buy.