The question of when to sell stocks is not easily answered. On the one hand, you know a correction is coming but the question of “when” isn’t so clear. Anyone who has ever sold early only to stand by and watch others reap in huge profits have felt the pain of premature sales.
Sure, once the correction finally comes you might have some consolation but by that point your brother-in-law has a new convertible so what do you care that you were “right” but just a little early. Of course, the only thing worse than selling out early is selling late. Nobody wants to be the idiot holding the hot potato once the market cools. So, where is the happy medium?
1. Set a Sell Strategy in Advance… then stick to it! What is your performance goal for this stock? If it is 10% then sell when it reaches 10% and move on. Learn not to look back. Everyone has those “could have – would have” stories.
2. Cut Losers. Admit when you have made a mistake. Live and learn. It’s part of the game.
3. Put it into writing. Use trailing stops or stop loss orders and other techniques to remain focused and take the emotion out of the equation.