I have seen many people struggling to figure out the perfect time to buy and sell stocks. Even great, smart investors face difficulties in buying and selling stocks at the right time.
Since most people don’t know the exact buying and selling strategies, they end up losing profits and regretting them throughout their lives.
Therefore, I have decided to share a complete guide on the best time to buy and sell stocks to get maximum profits.
Let us first discuss when to buy stocks.
Why it’s important to know the perfect time for buying and selling stocks?
Have you ever experienced, that you sell the stock and the next day it hits the highest limit or you bought the stock as it was trading at a high price, and the next day the price dropped? This is a clear example of wrong-time buying and selling of stocks. Hence, it’s important to know when to buy and sell stocks.
When to buy stocks?
Honestly, there is no right time to buy stocks. Yes, this is true. Instead of focusing on the right time, focus on the right action. There is no right time to buy bad stocks. This is the most important thing to understand before entering the stock market.
But there are some crucial parameters to verify whether the stock is fundamentally strong or not. Let’s have a look at them:
Consistent Profit: If you find a stock that is making a consistent profit every quarter, then you can consider the stock and go for further analysis. Remember, don’t buy stocks based on one parameter. Do a complete analysis and verify its fundamentals.
Low Debt: Look for a company with minimal debt, because debt makes your investments riskier. A company with high debt has a chance of going bankrupt if it fails to repay debt in the given period.
Steady sales growth: Sales growth is an important factor when looking for a profitable company. As we all know, it’s hard to be profitable with low sales. Hence, look for companies with steady sales growth.
No Legal issues: When analyzing a company, make sure no legal issues are going on. It can be anything from trademark issues, defective products, tax issues, etc.
Good management: No matter how profitable the company is if it’s not able to manage its finances and make informed decisions, it’s hard for the company to survive.
Hence, it’s important to check whether the company has a good management team or not.
Those mentioned above are just the key factors in growth stocks. As fundamental analysis is such a huge concept, we will briefly discuss it in our next blog.
When to Sell Stocks?
This is the most awaited question and also the most difficult one to answer, but I will do my best to explain it in the most simplified way.
We all know that in order to avoid losses and make consistent profits in the market, it is very important to know when to exit a stock. There are several reasons to sell stocks. They are as follows:
Fundamental changes: It is preferable to sell stocks if the company’s fundamentals have changed or worsened. The change could be anything from an increase in debt to a drop in sales from the previous quarter.
Industry crises: Sell stocks if the industry to which the shares belong is in crisis. For example, during COVID-19, the hospitality industry was severely impacted, urging investors to withdraw their investments.
Portfolio Rebalancing: If you believe that you could earn better returns in another stock/asset compared to the one in which you are currently invested, then sell your stocks.
This is a good way to rebalance your portfolio and make your finances grow stronger for you.
Investments Goals reached: If you made your investments based on the goals you wanted to achieve, and the goal is accomplished or is close to being accomplished, it is better to sell your stocks rather than wait for any mishap.
Final Words
The most crucial factor in stock investing is conducting thorough research. Find stocks and businesses that are fundamentally strong and have a solid operations that will produce long-term returns.
You can use the resources offered by online brokers and make an informed decision.
I hope you find this article relevant. We will continue to share informative blogs every week. Stay connected and stay safe.
Disclaimer:
This article is for educational purposes only. We do not guarantee any profit or loss from the information and strategies shared.
Have Faith in Yourself.