Category: Money Tips Date: 2006-02-12
Select potential stocks, grasp the best of the stock purchase price is certainly important; but the timing of the stock to sell profitable investments may be the most critical component. Yet to understand the time to sell, before you do all the efforts are likely to become a "exercise in futility."
Good than to buy a good sale
"10 shares must not be missed."
"5 in the next 10 years, most worthy of holding the stock."
Investors can often see such investment advice. These investment proposals are emphasizing buy stocks. Today's investment world tend to be more concerned about buying rather than selling the stock. Obviously, to know which stock to buy is indeed very important.
However, I believe that when investors sell the stock right is one of the biggest challenges. Weakness of human nature decided to sell the majority of investors will show good stocks to lock in profits and to avoid evaporation of book profits. May often happens is that the stock performs well, we sold it to continue to perform well. On the other hand, most investors will continue to hold the stock in order to avoid poor performance to withstand losses and to avoid acknowledging mistakes made investment decisions. We have summarized some of the principles of the stock to sell in order to reduce human nature to make us sell the decision-making. If you follow the following four principles, it is very likely to improve your investment results.
When the following situations occurs, selling stock is a good idea:
1. Stock target price to sell
Sometimes the stock market overreact to short-term events, which gives you a chance to get a good investment opportunities. Almost every good company has grossly underestimated the time the market. Similarly, almost every good company has a seriously overvalued by the market when stock prices far beyond their actual value, this situation is too optimistic about the prospects for challengers to the company occurred. If you just hold this seriously over-estimated the market shares, then you should consider reducing your position on that stock in order to achieve some of their profits. For example, Shanghai Automotive (600104 market, information, advice, more), after the 2003 blowout automobile industry, the majority of investors believe that in 2004 the automotive industry to continue its rapid growth, while the Shanghai Automotive's shares in 2003 based on the share price has also been doubling continue to be optimistic, in the end result is that the domestic auto industry in 2004 was only slow growth, but also a substantial decline in profit margins, so Shanghai Auto's shares in 2004, also tragically cut short.
2.'s Fundamentals deteriorate
Once the notes that the company's fundamentals began to deteriorate, you may want to sell the stock. By analyzing the company's balance sheet, you can know whether the company's fundamentals deteriorate. Rising debt levels, rising inventories and accounts receivable rose faster than income, the above is to determine the efficiency of the company began to deteriorate in three common early warning signals. Such as the Nankai Godwin (000,537 market, information, advice, more), the main income of 222 million by the end of 2002 down to the end of 2003 0.98 billion, while the accounts receivable still be decided by the end of 2002 rose to 27.68 million yuan Of 2958 the end of 2003 million yuan, which shows that the company's fundamentals have deteriorated significantly. If investors continue to hold the stock may suffer greater losses. The following also lists a number of other company's fundamentals began to deteriorate early warning signals:
* Reduced rate of return on shareholder's equity
* Decline in profit margins
* Market share contraction
* Ill-advised mergers and acquisitions
* The management of unexpected changes
3. Wrong buying stocks
Whether you stock research how much energy you are likely to be wrong. Even if, like Buffett and Peter Lynch have committed such a great wrong investment decisions of investors. When buying a stock, you may encounter some unexpected situation, such as related-party transactions in question, change accounting methods and the decline in competitive advantage and so on. If you buy this stock and found a similar problem, you should consider selling, even if the loss meant to sell. Wise to stop, in search of better investment opportunities is far better than the one destined to continue to hold underperforming stocks. For example, STAR Group (600,734 market, information, advice, more), since 2000 due to increased competition in the computer industry, market competitiveness of the company's products declined, the share price since 2000 has now been dropped more than 80%, far Super-market average declines.
4. The implementation of portfolio rebalancing
When the bull market, since almost all of the shares are up, investors often used to ignore the company's fundamentals. Usually only to a bear market, when investors will be a clear understanding of the fact that some stocks can rise, even in a bear market. Has a strong competitive company can withstand a decline in the economic cycle, but there is no competitive when the deterioration in the market will decline further. For example, Tsingtao Brewery (600.6 thousand quotes, information, advice, more), as the first brand in China's beer industry, from mid-2001 to the present, the Shanghai Composite fell by half, while its stock price is almost no decline. This is why you should always ensure that you have a combination of years to replace the stock with high-quality low-quality stocks.
When the stock rose to an account for a large proportion of your portfolio, you might consider selling part of the stock to gain profit. If a stock in the past only 20% of your portfolio, but it doubled over a period of time, stock prices, and your portfolio of other stock prices little changed, then your stock portfolio now account for nearly 40% of ratio. In this case, the performance of your current portfolio would be too dependent on one stock, and in this case you should consider selling part of the stock for the implementation of portfolio rebalancing.
