iBankCoin
Joined Dec 27, 2015
164 Blog Posts

Why and When Your Should Bail in an Investment in the Stock Market

If you are looking to achieve financial freedom at some point, you will likely need to invest a lot of your personal capital into the stock market. When you are looking to invest, you will likely go into each investment with the intent of doing well and holding the stock for a long time. However, with each investment there does come some risk and there is an opportunity that things may not go your way. If this is the case of one of your investments, it is important to know when you should exit the investment and take your losses. There are several tips that you can follow that can make this decision process easier for you.

Stress

If you are experiencing a lot of personal stress due to money that is in one of your stocks, you should look to sell that stock immediately. While there is risk that comes with investing in the stock market, you need to remember that it is a long-term investment option. If you are losing sleep over one stock, it would be a good idea to sell that stock and invest it into something that more matches up with your risk tolerance.

Poor Analysis

Another situation in which you should sell a stock if it is at a loss is if there are bad stock analysis reviews completed by professionals. All publicly traded companies will be analyzed by a variety of different professional analysts who will give a rating for the stock. If you have a stock that is already losing money and there are some negative reviews coming out from analysts, it could be an indication that a bigger drop is coming. This could make it a great time to sell.

Change in Company Reputation

If there is suddenly a negative trend in the reputation for a company, it is a great time to sell a stock. Many times, the reason why a company and stock will do well is because the company has a great reputation for quality. However, this can quickly change if the company suddenly starts producing less quality products. For example, if a company produces the best SUV 2017 model year, they could see an increase in stock value. However, if the 2018 model suddenly gets negative reports, it could be the start of a stock slide that you should try to get ahead of.

Tax Advantages

If there is one advantage of selling a stock at a loss is that it does give you some tax advantages. If you sell a stock at a loss, you will be able to take that loss and offset it against other capital gains that you have had in that given year. This means you could reduce your tax liability if you have made money that year in the stock market. However, you need to be strategic with when you sell a stock for this purpose. Depending on how your trades have gone over the past year, it might make sense to sell before the end of the calendar year or wait until the following.

Something Better

Finally, if you noticed that stocks in your portfolio are not doing well, you should also consider whether there is a better place to put your money. There are thousands of companies that you could consider investing in. If it seems that there are better investment opportunities out there right now, it might make sense to cut your losses and put your money into something better.

 

While it is important to know when you should sell a stock because it is not doing well, you should also take other steps to determine when you should reallocate your portfolio. Even if things are going very well, your personal situation can change at any time. Because of this, you should reconsider your investments on a regular basis to make sure your current investments are right for you.

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