Investing Tips Information

When is the best time to sell your stocks in the stock market?  I am surprised at how many people just hold on to their stocks and think that they will go up forever. In this article I will share with you a strategy that I feel is the best way to minimize your risk in the stock market.

As most of you will know, the stock market goes up and down due to greed and fear. A classic example of this was the rapid rise and fall of the Nasdaq in the late 90’s and early this century. It was commonly known as the “Nasdaq Bubble”.

In the period between 1996 and 2000 the Nasdaq rose from 600 to 5000.  Many companies rose massively in value on the stock market just on pure speculation. They had not even made any earnings at all (pet.com was a classic example of this). Millionaires were being created at a rapid rate as the value of the stocks rocketed up.

However, early in 2000 reality set in and the Nasdaq crashed to 2000 within months. Over the next 2 years the Nasdaq fell further to the 800 mark. Many of the relatively instant millionaires lost all or most of their money quicker than they earned it. This was when the Nasdaq bubble burst.

So how could many of these investors avoid losing most of their funds?  The trick is to invest in a smarter manner. If you a genius in the stock market, then you may have read the warning signs and then sold near the top. However, many so called technical analysis experts lost significant money on the Nasdaq due to greed.

In my opinion, once your stock, say stock A, has doubled in value then you should sell half of that stock and invest the other half elsewhere (perhaps stock B). This means that you no longer have any risk with stock A (you basically have created a free trade). If you have done your homework with stock B, then hopefully you can sell half of that stock when it doubles too and buy stock C with the revenue. So the process continues. I also sell half of stock A again when it doubles again, but that is not necessary and just a personal choice. You may also want to spend some of the returns in another form of investment.

So imagine if you had used this strategy during the Nasdaq bubble. If you had used this strategy with stocks invested in the Nasdaq and hence put half your earnings into other sectors of the stock market or other investing sectors, then you would be doing pretty well financially now.

I hope that you take this strategy into consideration when you next enter the stock market. Please do not let greed ruin your destiny and wealth creation.