Quite often, investors and friends ask me this question. It is difficult to give you a straight or satisfactory answer because it depends on so many factors. When to sell depends basically on your knowledge, understanding, experience, holding power, your risk appetite and your circumstances.
As I said before, 3 persons can buy the same share at the same price and each one can have a different result. A small trader will sell when the price went up 20%. Another will sell even at a loss because he has no holding power. A smart investor will not sell as long as the company is showing increasing profit.
However, I will try to give you some guidelines so that you can make more money. The following are reasons for selling:
You must not forget about transaction cost whenever you sell or buy.
You must also remember to keep some really good shares for long term to be able to make more money. If you have to sell some for whatever reasons, always remember to buy them back.
Short term traders cannot be rich.
All investors must examine their track record to see how well they have been performing. They must change their method of selecting stocks to buy and sell if they cannot double their capital within every 3 years. You can double your capital in every 3 years if you can make about 24% per year, every year. If you are confident to make more than the interest rate for margin finance, you should use it to help you make more money.
If you have bought Latitude, VS and Lii Hen all of which have gained a few hundred per cent per year and sold at the right time, you could have easily doubled your capital every year.
From my observation most investors cannot overcome their emotion of fear or greed and think logically. If everybody can think logically there will not be any unvalued stock for you to buy. As a result, most people sell too early. They would feel ashamed to buy back at a higher price when the company continues to report increasing profit and miss the opportunity to become super rich.
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