Investing 101: Profit-Taking

The area of profit-taking is one of the most important aspects of investing. Regardless of how good you are at choosing investments, it will not do you any good if you never take profit. Here are a few things to consider about profit-taking. The most fundamental rule of investing is that you want to buy low and sell high. You want to get out at the highest possible price before the stock starts to decline.

Maximizing Profit-Taking 

When you are investing, you need to be aware of what the market is doing as a whole. If your stock is doing well and the rest of the market is not, you might want to consider selling before your stock moves with the market.

You might also want to set benchmark prices. Whenever the price of your stock reaches a certain price, you will then reevaluate your investment plan. You should research similar companies to see what their stocks are selling for. If similar companies are selling higher, then you might want to keep going. If they are lower, you might want to sell.

Portfolio Considerations

If one winning stock represents more than 10 percent of your portfolio, you should consider selling some of the stock to lock in your profits. Do not try to time the market and wait until you can sell it at the highest price.

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