Stock Tips: Buying & Selling
- Successful stock investing is more than simply buying low and selling high.success and moeny currency image by patrimonio designs from Fotolia.com
Knowing when to buy or sell a stock is the most effective way to maximize your profits and stay afloat in a turbulent market. Your financial strategy should be more than "buy low and sell high," although that approach is not without merit. To enhance your portfolio's profitability, you have to consider when to hold a stock, when to avoid the hottest trend and how to ferret out a winner before everyone else knows about it. - There are several factors to consider when researching stocks to buy, according to the Motley Fool website. Buy stock in a company with one type of product or service, as well as a steady customer base. These two characteristics mean the company has a stable and viable product and a profitable demand for it. You should also look to invest in stocks that dominate their particular market and have stable management. In terms of financial performance, look for stocks that pay large, secure dividends and are listed among Standard & Poor's 100 highest-yielding stocks.
- Investors should avoid the hype when choosing stocks to buy. Consumer confidence, the economy, the job market and the U.S. dollar might be weak, but there are places to look for a profitable investment. For instance, Nielsen Co. market research indicated in early 2010 that consumers were shopping again after the recession but going to bulk wholesale stores like Costco and BJ's Wholesale Club to save cash, according to the Motley Fool. The thrift trend could be expected to continue, making these consumer stocks worth considering. Also look for mispriced stocks---those that are undervalued by the market as a whole.
- Sell a stock when you perceive a flaw or deterioration in the company's underlying business structure, "Capitalism Magazine" recommends. In other words, sell if a central product has failed or if new competition is undercutting the company's bottom line. Also consider selling a stock if its price rises too quickly. For example, if a stock's value rose 200 percent over a year, it could make up too large a percentage of your portfolio and present a risk of loss. You could sell off part of the stock and reinvest the profits in other companies to minimize the risk of a loss.
You should also play close attention to the management team's actions. After all, they are on your payroll if you're a stockholder. As soon as you begin losing confidence or if you perceive the company's leadership is losing direction, it could be time to sell.
