When is the Right Time to Sell Shares?

Every investor wants to realise their gains in due time, but knowing when to hold or sell a stock can be a deceptively difficult call to make.

On one hand, exiting from a position can help you gain monetary profits in the here and now, which can give you the capital boost to grow your wealth and allow you to reinvest. On the other hand, exiting out of a position early can lock you out of a more rewarding sell order in the future.

While stock price movements are highly speculative, investors can smoothen out the randomness of their call. Naturally, this would entail them creating a proper exit strategy to sell their shares in a way that’s beneficial to them.

How can investors make that call, you may wonder. Well, you’ve come to the right place. In this article, we’ll delve into the key signs that it’s time to sell your shares and realise a portion (or the entirety) of your stock investment.

Let’s jump right into it!

1.It Aligns With Your Broader Investment Strategy

Before you sell a share of a stock, ask yourself this: does it support your broader investment goals in the short term or long term?

If your answer is yes, then the subsequent follow-up is a no-brainer: go ahead and sell a portion of your stock’s share to realise that gain. 

While it can be tempting to hold onto your stock for a little longer, it’s important to keep your broader financial objectives in mind. 

Remember, stock investments are a vehicle for capital-building—there’s no guarantee that it’ll continue to rise in price; that is, unless there’s a major announcement or positive change in its fundamentals.

To illustrate the point, let’s assume that you’re allocating a portion of your investment to a real estate developer’s stock to grow it for your daughter’s tuition.

If the stock price has grown enough to meet that specific goal, then that can be a sign to pull out of your investment and benefit from the capital increase.

While the allure of a higher potential earning cap can be strong, it’s important to remain steadfast and logical in your investment approach: it won’t always be a profitable ride in the world of investing.

2.Your Investment Goals Have Changed

It’s also possible for life’s many variables to change and transform the “best” investment decision according to your needs.

For instance, you may have been saving money for your child’s tuition in a university program, but they have revealed that they want to get into the trades. Or further studies in law or medicine. 

Either field will require a whole different tuition scheme than the typical two to four-year university route.

In any case, it’s your duty to adjust your investment strategy to account for this new development. Of course, it doesn’t have to gravitate towards your family; your own objectives take centre stage in the decision process too.

It’s important to take the time to critically assess your financial situation and its alignment with your goals regularly. Review it quarterly or annually and truthfully answer if the goal still speaks to you.

If it doesn’t anymore hold that same weight, then you may consider executing actions that can align with your adjusted goal—which may or may not entail selling your shares through a broker or in a stock market exchange platform.

For instance, if you’re holding IAG shares, you can typically sell them in your chosen brokerage firm by placing a sell order and waiting for someone to buy it from you. You can also sell the share without a brokerage in certain countries. Learn how to sell IAG shares without a broker in Australia.

3.Company is Getting Acquired

When the company you’re investing in is acquired by a bigger company, it may be a sign to jump ship and put your capital elsewhere. A company acquisition is a turbulent affair, to say the least. Company leadership and business strategies can change, which may no longer align with your overarching financial goals.

Furthermore, an acquisition also signals a negative outlook to other shareholders as the company owner has chosen to part ways with their business. This can naturally cause a fall in investor confidence, thus leading to a reduced price per share of the particular stock.

If the company you’re investing in falls under this unfavourable scenario, then you can consider parting ways with the company and placing your shares elsewhere. This way, you’ll have greater control of your portfolio and remove yourself from a the shaky and unpredictable short and long-term effects of a company acquisition.

4.The Investment’s Price is Dropping Fast

When there’s a steady fall in price over a long-term period, it could signal low confidence in the stock. You may have to review the company’s fundamentals through their quarterly reports as well as technical indicators.

Holding onto a falling investment, particularly if it’s not a popular or established stock, can lead to greater losses in the future. A smart investor should ideally put up a stop-loss to prevent their investment from falling further than they can afford it to. 

That said, it’s important to consider the broader economic conditions before you make your selling decision. Declining economic conditions can bounce back in some situations, and this could raise the price of your investment alongside it.

However, if your stock is experiencing a decline independent of market conditions, it may be a sign to cut your losses and sell your position in the market instead. This way, you can bounce back with another investment with greater confidence. 

5.Local Market Growth is Stagnant

If you’re investing in a local market through an index fund or ETF, and it’s experiencing slow growth or a declining market value, then it may be time to release your shares and put your capital elsewhere.

Declining growth of the overall market can negatively impact your share’s value. This may cause your share’s price to depreciate over time, which can leave you vulnerable to losses and a worsening financial outlook.

To prevent that from happening to you, it may be better to exit a stock investment position and shift to another profitable investment opportunity instead. This can help you capitalise on better stock growth opportunities, helping you remain steadfast and confident in your stock investment portfolio.

6.Company Direction is Unfavourable

As a shareholder, you own a piece of the company and have a stake in its growth and development. You share in its profits and in its losses. As such, if you see that the company’s direction is heading towards a path that you deem unfavourable—you can vote with your money by exiting out of the stock and selling your shares.

An unfavourable company direction can mean different things to different investors, though there are some shared commonalities. For instance, you may not like the change in the company’s management structure. Or you may dislike the way that the company is expanding. The company’s declining sales may also push you to exit your position.

In any case, you have every right to pull out of a stock position if the company is performing activities that you assess to be unfavourable for its long-term growth. By doing so, you can remove yourself from a potential freefall and put your capital in more opportune ventures and stock options.