What is a GOOD reason to SELL a stock?

Question

okay so im playing this game called "stocksquest" with my business class, can someone give me some ideas as to why one would sell a stock.

therefore i can buildup on your answer.

thank you.

Answer 1

Good reasons to sell a stock:

when it is overvalued and you want to make some money; when you know that it is going down and will go down further, so you cut your losses; when you need the money for private reasons and need to change equities into cash; when you think that the stock cannot go up further; when you want to get out of the market (i.e. stop playing the market). These are the main reasons why you should sell a stock.

Answer 2

It no longer provides good returns.

Also, It no longers help you diversify your portfolio.  The stock used to run counter-cyclical (up when the others were down, and viceversa), now is in sync with the other stocks in your portfolio.

Answer 3

When you bought the stock you must have had good reasons for buying it. When circumstances changed you probably had reasons for keeping it. Otherwise, if the reasons for buying it or for keeping it are not valid anymore, then sell it.

Another good reason for selling it is when you have a very good (short-time) return on the stock, when you actually need the money for buying stuff (cars, houses, etc).

See also http://www.numericalexample.com/content/...

for computing the returns on a stock.

Answer 4

One loses confidence in the business or the market.

One has a set sell price, i.e. you want to make a certain amount and someone meets or beats that amount.

One decides to diversify one's portfolio.

One needs more liquid capital.

Said investment is not performing as well as one hoped and one decides to move the funds  to a better performing stock (reallocation of funds)

One see a weakness in the market and decides to reduce one's exposure by selling off some stocks and switching over to bonds.

And many more.

Answer 5

There are various reasons one might sell a stock besides needing the money.  

Traders sell a stock because it has had a run up in price and the technical indicators say the stock is overpriced.  Depending on the traders' technical indicators preference they might sell based on the RSI above 80 or the MACD signal line turning down or some other of dozens of technical indicators.

If the company comes out with some bad news such as earnings will  not meet expectations or sales dropped by 5% or something similar,  it might be a very good time to sell.  

If it is approaching year end and you have profits that need to be offset with losses, then it is a great time to sell the loosers.  Also vice versa.

There is an old adage on Wall Street.  Buy on the rumor; sell on the news.

If it has come to light that insiders are selling the stock.  That is a good sign that maybe you should be selling too.

The CEO resigns.   The CFO resigns.  VPs leave the company for greener pastures. Any of those are signs that maybe it is time to exit the stock.

The company gets sued for patten infringment.

The economy heads south.

Interest rates increase.

Answer 6

if the stock is going down

world events have negative impacts on the sector/company

lots of experts downgrade

finally, if jim cramer says, sell sell sell

by the way, i play stockquest too....60% increase so far since september '07