Guidelines for selling stocks and ETFs

Here are guidelines to consider when selling a stock 1:

  • The stock is significantly overpriced relative to its original cost
  • You have a better investment for your money
  • You need the money within 3-5 years
  • The reason you bought the stock is no longer valid, you’ve lost confidence in the company, or you no longer understand the company

Selling a stock above its purchase price is essential to earning a capital gain.  Remember that there is a capital gains tax to pay on the proceeds from the sale of the stock unless the stock is held in a tax-deferred brokerage account 1.

I use a simple calculation to guide the sale of my stock above purchase price.  Here’s a link to that calculation.

Reference

1.  Identifying sell signals for a stock.  The Motley Fool.  David and Tom Gardner.  The Columbus Dispatch, page D4, Sunday, July 22, 2012.

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