51 Finance Monthly. Inve s tmen t The most common measure is a price-earnings ratio (or P/E). The lower P/E ratiomeans undervalued stocks. Investors can compare the Company’s P/E to its peers in the industry. If a stock is undervalued, it is considered a good buy. Disciplined long-term investing: As a long-term investor, you need to avoid panic over short-term movements. If the Company, you have invested in is fundamentally strong, you should continue to hold its shares despite the shortterm volatilities. When to Sell Stocks A Stock Hits the Price Target: A trader can sell a particular stock they hold when its price has appreciated and reached close to the target price. You can decide on a specific percent appreciation in stock price, after which you will exit the position. If you have blue chip stocks and it approaches your desired target price, you can book profits and buy them later at a lower price. If it is a penny stock, it can be a favourable opportunity to book profits because it is unlikely to sustain the hiked price for an extended period. The sudden increase can be due to speculation with an impact on headlines. Adjusting a Portfolio: One of the common reasons to sell stocks is to rebalance a portfolio according to your financial goals, risk tolerance, and investment time horizon. Meeting Set Goals: You can sell your stocks if you have achieved your financial objectives. You can place a limit order to sell your stocks at your price or better. A Good-Till-Triggered (GTT) order type can help you place such orders. The stocks will automatically get sold when it reaches your set target price. Opportunity Cost: Investors consider selling a stock if they find other opportunities to earn a greater return. If you hold an underperforming stock, it may be time to sell it to free up the capital to make alternative investments. Prepare a strategy for buying, holding, or selling a stock that factors in your risk tolerance and time horizon. Also, consider various factors involved in stock investment-related decisions. You can keep a watch on its business performance and consider selling the stocks in case of a major change in the management or the business model that might adversely impact the business. “One of the common reasons to sell stocks is to rebalance a portfolio according to your financial goals, risk tolerance, and investment time horizon.”
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