You have just made a buy, congratulations! Hopefully, you have bought shares in a company that you really expect some decent returns from. Well, how can you expect that? Allow me to challenge your mind set today:
What are your stock investing decisions based upon really? Why did you buy shares in that specific company (and not another one)? And for how long will you keep them?
And what if..
- Your stocks rise 20 % after the first two weeks, what do you do: Keep them? Sell? Buy more?
- They fall 20 % after the first two weeks, what do you do: Keep them? Sell? Buy more?
- After one month, hardly no movement in the market price at all: Keep them? Sell? Buy more?
- One article on an experienced and trusted financial site recommends the reader to sell (or at least not buy) this stock, and they seem to argue well for their conviction too.
- Some of your fellow, trusted co-workers tell you what company they just invested in, and what stocks are regarded as the hottest “buys” according to a newsletter they have had some great investment tips from earlier. And yours is not among the “hotties”…
What now: Keep? Sell? Definitely not buy more?!
Do you act upon any of the situations mentioned above? I wouldn’t blame you. But if you do so, let me be honest with you now: If you do so, you act upon distractions. And distractions have never been the way to success and big gains in the stock market!
I guess you got my point, eh? Every single day, Mr. (Insane) Market is there to offer you an almost endless list of different companies to buy stocks in, and to confuse you even more, he offers you these companies at different prices from one day to another also. As long as you choose to dive into the stormy seas of the stock markets, maybe even being a beginner at stock investing, you actually have only two choices. Either,
- You can base your decisions on news (general or specific about this company), other people’s advice, opinions, market analysis or results for the company. The decision you make may seem to be based on logic, but after all it is based on your feelings. You just use a logical argument to back up your emotional decision.
- Or, you can base your decision on a pre-defined criteria. Which in other words means that when to sell a stock (either a win or a lose), is defined before you buy shares in that company. Then your stock investment is based on sense, on logic. Look at it this way, you have decided to climb a mountain. On your way up, you see a path which seems much easier and more comfortable to walk, and you even talk to someone who came that way, and they recommend it too (quite tempting to walk that way when you are exhausted!). The only disadvantage is that it leads downwards again… Would you choose it? Most likely not. Why not? Quite obvious, it won’t take you to the top of the mountain. Likewise with your stock investments: Sticking to the right path and following your map that leads to the top of the mountain (following the plan and the pre-defined criterias only) is the most likely way to long-term gains and a lasting success in the stock markets.
Conclusion: You need to have a game plan for your investments in the stock market. You ought to know why and when to buy, and how to manage your investment. Including when and why to sell, either you have a gain or a loss.
Want to learn when and why to buy and sell? Learn more here: The Stock Bargain Method
My purpose with Stock Bargains is that it might be one of the top value investing blogs on the Internet. I would be more than happy to get your feed-back or help you with a related issue. Please don’t hesitate to write me a question or a comment to this article.