When To Sell Your Favourite Stocks: Master The Timing

Trying to figure out the best time to make lots of money from the stock market is really tough. The stock market is always changing and it’s hard to know when to buy and sell stocks. Sometimes, a stock you buy might go up right away, or it might end up being a bad choice. That’s why, when you’re an investor, you need to plan how long you’ll keep the stocks before you buy them.

How long you should keep the stocks depends on your plan and the current market situation. It’s like thinking about whether you can handle the ups and downs of the market in the short term. If you’re okay with that, then it might be a good time for you to invest.

Usually, over a long time, the stock market tends to go up. So, if you want to make your money grow over time, it’s a good idea to invest for a long while. Buying and selling stocks quickly to make fast money is like taking a chance, not really investing.

A famous investor named Warren Buffet once said, “If you don’t want to own a stock for at least 10 years, don’t even think about owning it for 10 minutes.”

Key Takeaways

– Deciphering the optimal stock market timing is intricate due to its dynamic nature.
– Determine your holding period based on your tolerance for market fluctuations and potential gains.
– Extended stock investment often leads to substantial growth, in line with market trends.
– Sell when gains surpass 20-25%, at peak valuation, or with changing stock perceptions.
– Holding quality stocks and adding during downturns leverages compounding for enhanced returns.

When to Sell Stocks

When should you sell your stocks? Well, in normal times, it’s a good idea to sell and make money when your unrealized gains are more than 20-25%. But you might also want to think about selling if you think the stock has reached its highest point. You can figure this out by looking at the company’s details or using some special tools. Or, if you’ve changed your mind about the stock and don’t think it’s a good choice anymore, you might want to sell.

Remember, stock prices might go up and down quickly, but over a long time, they usually go up and give good returns. For example, if you bought a stock called HDFC Nifty 50 ETF in 2015 for Rs 71, and you still have it, now it’s worth around Rs 193! That’s more than double.

Why are long-term investments a good idea? Well, it’s like a magic trick called compounding. If you invest in good stocks and wait, your money can grow even more. If you have the chance to buy more shares when the prices are low and you still think it’s a good idea, you might make even more money in the future.

Why Long Term Investments Are Good?

It;s all a game of compounding! 

Holding on to investments in quality stocks will allow compounding to unleash its goodness. If you are invested in stock from lower levels and still find the risk-reward ratios favourable, adding more quantities on dips and averaging out your investments may be considered to reap better returns in the future. 

That said, selling stocks fearing loss or sudden price falls tends to hurt the portfolio. You might save some money in the short run, but you could be giving up on possible multi-bagger returns.  This can be reaped by holding shares for a long period. 

Let’s bring in some facts! 

Example

Let’s talk about Nifty.

Not long back, only two years ago, during the early days of COVID-19, Nifty levels were down and were a point of concern. In March 2020, the market hit circuit levels, and the Nifty hit fresh lows of 7500 points!

However, that was a turning point. 

Of course, a once-in-a-lifetime pandemic struck us and changed some things forever, but the course of the market has been unstoppable and resilient, to say the least.

But one year later, in October 2021 Nifty breached the 18,000 mark.

Almost a 250% return in 1.5 years

Holding On To Loss Making Stocks

It’s a good idea to let go of stocks that are causing losses and adjust your investment mix from time to time. However, this doesn’t mean you should rush to sell and get worried about small price changes. The market has had times of big gains followed by small drops quite often.

When you’re dealing with stocks that are making you lose money, remember these three rules to decide when to sell them:

1. If the losses are more than what you planned for compared to the possible gains, it might be time to sell.
2. If the stock’s price falls below a certain level you set (called “stop loss”) or goes lower than strong support areas, you might want to consider selling.
3. Don’t hold onto a stock just to save a little money on taxes. You might end up losing a lot more on the stock itself.

Remember, it’s about making careful choices and not making hasty decisions based on small ups and downs. The market goes through ups and downs all the time, and it’s normal.

What is the Ideal Holding Period? 

If you are not running short on funds, staying invested until your goals are realized may be the best way forward. Some investors advocate staying invested for years. 

Thus investing strategies vary for each individual and depend on their risk appetite. It should be aligned with investment goals rather than what others think.

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