Why You Can't Be A Stubborn Investor

Some people, when they first became investors in the stock market, may have thought that they would be in their positions for the long term. For some financial instruments, this may be a good idea, but for individual stocks this may not be the best plan. Some financial advisors believe that it should be investors' natural inclination to sell, so when it comes time to do so they are not having any particular difficulties with it, but this is not always the case.

Stocks can take large tumbles in a day and continue to experience losses. Anyone who keeps a stock because they purchased it at a high price will end up losing in the end. What happens when people hold onto a stock that has lost a lot of its value and is not recovering is that they miss out on opportunities to search for something better. After a stock has been sold, the money can be used to purchase other stocks that have a better future. If investors continue to hold onto a non-performing stock, they just continue to lose money.

Sometimes a stock is on its way up. People who have purchased the stock when it was at a low level are always happy to see this happen, but these people may want to consider following a few rules when it comes to selling the stock. As the stock is rising, investors will want to hold onto the stock until it reaches the peak. The problem here is that no one knows when the peak will appear. It could be that the stock will rally for a long while and then drop dramatically when it comes time for other investors to begin profit-taking.

When the stock begins to fall, investors who waited for the peak will have missed it and their investments begin to lose value. A way to avoid this is to spend less time on when the stock will reach its peak; it is better to think about when the investment has given the investor at least a 50% profit. At this point, it is recommended that 50% of the stock be sold. A 50% profit is thought to be a tremendous amount of money and something of which the investor should be proud. It should not cause them any anxiety selling at this point and they will also still have the other 50% in the stock.

In the beginning, it looks like a good idea to purchase a stock and it performs well, but anything can happen that changes the stock's outlook. When people see the signs of this happening they must not be stubborn and hold onto the stock; this results in investors losing a lot of money when they hold onto previously good stocks that are now taking a tumble down the stock market. When these signs present themselves, the investor has to sell the stock.

For example, a company may experience some bad news that causes the stock to begin decreasing in its value. The clear sign is that there was bad news in the press. If the news is fatal and is signaling the end of the company and the stock, it is something that the investor has to recognize and sell before even more bad news comes out against it. The bad news that comes after a stock's value goes down is that the analysts will add to its demise by downgrading the stock.

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