When Should You Sell Your Stocks? (5 Rules for Selling)

When should you sell your stocks? Here are the five rules for when to sell your stocks.

When should you sell your stocks in the stock market? That’s one of the most common questions I get. How do you know?

Selling can always be a stressful thing to do because ideally, if we did a good job buying a stock, the best time to sell - should be never. If you are going to be selling some of your stock whether that's for some passive income, or if you'd like to save money to perhaps invest somewhere else, here are 5 great rules to stick to.

For reference, I'm using the Robinhood app, and I'm a dividend investor but this should apply no matter which type of investor you are. Please Note: this video is for entertainment purposes only and I will not be held responsible for any incurred losses.

Sell Rule #1, you might want to sell when the company long term “profitability” is not looking too good. They did a study analyzing stock returns between 1990 and 2010, and stocks with the highest trend in earnings growth, returned 11.5% per year, which is a LOT if you’re not sure - while the stocks with the lowest earnings growth, returned only 1.5% per year - which is pretty much less than inflation. Just for comparison, the top 500 companies in the US returned an average of 6.3% per year. So basically what that means is, companies that can grow their earnings over time will see the stock price obviously move higher.

Sell Rule #2 - selling when a stock has gotten excessively expensive. One good example right now is Tesla. The hype is at it’s peak, everyone screaming about Tesla and it’s worth more than GM and FORD combined. When that happens, it’s a good time to consider pulling back on the company and waiting until a more reasonable valuation and the price of the stock drops.

Sell Rule #3 - If the size of your position becomes overly large - you may consider selling. If you’re a dividend investor like me, you might notice one of your companies is responsible for a REALLY big portion of your income, and you don’t want to be in that situation. Because if the dividend gets cut, you lose a big part of that income, so you want keep them in moderation so they don’t represent an overly large percentage.

Another way to look at it is if the value of the stock itself has increased to more than 5% of your entire portfolio. Anything above 5% of your entire investment portfolio should be taken a look at and maybe leveled off and brought down below 5% because anything more than that - can become risky. 5% is not the definitive rule, it’s just what I’ve been comfortable with

Sell Rule #4 - sell when you have a better investment idea. This could be anything, it doesn’t even have to be another stock. It could be real estate, a bond, or your education. In the case of my stock portfolio, there are definitely companies in that are losing money that could be put to better use elsewhere in a company that’s perhaps more healthy, pays a safer dividend, or has a higher earnings growth. Fortunately for me, there are enough winning companies that offset any losses from my other investments that more than make up for it all.

Sell Rule #5 is probably the best and easiest way for us as dividend investors to keep track on when to sell a company. Obviously, the goal is to have our dividend income fund our lifestyle from all the passive income we collect, however - If a stock becomes dangerously close to cutting it’s dividend, it’s usually time to sell.

*Links above include affiliate commission or referrals. I'm part of an affiliate network and I receive compensation from partnering websites. The video is accurate as of the posting date but may not be accurate in the future.

[Je.rone_]

*I personally think knowing when to sell your stock is harder to figure out than knowing when to buy a stock*

[Winter-Bruin]

"I'm going to be 100% honest and tell you that the right time to sell is..." cuts to a commercial.😤

[PassiveIncomeTom]

*Sell when you need the money or find a better investment. Otherwise buy and hold.* 😉

[JasonPizzinoOfficial]

Selling on the hype, buying on extreme fear. Two of the best in theory but most difficult in practise! 😁📈📉

[Daxboy]

Andrei: You open up Robinhood.
Me: Cries in European

[CaseyBurnsInvesting]

I actually just sold all of my shares this morning. Paying off my car. I wouldn’t buy these stocks I own at these prices so I think a better place for my money is debt.

[IrvOfficial]

The four most dangerous words in investing are:



“This time it’s different

[thatPTpharmacist]

Buy when there is blood in the streets and sell when you see people becoming too happy aka its starts becoming too good to be true and at that point it most likely is

[Squintillions]

Just been doing some end of year re-evaluating of my portfolio. Other reasons I’m selling:
1. In mutual funds with high expense ratios (invested in by a financial advisor before I was paying good attention to such things) that don’t make sense for me to keep.
2. In companies that have a very low dividend ratio (just sold one yesterday) with slow growth and I know I can make better dividends with less risk on a diversified ETF.
3. Just sold Facebook because I don’t want to support the company directly any more with my money because of ethical and privacy concerns.
Wanting to get some cash out of the market to buy a house in the next year or two.

[GenExDividendInvestor]

I’ve generally regretted selling stocks (not always). Like most investors, I wish I had invested more when I was younger...

[shannoncargo]

Love how you compair a failing relationship to a bad stock haha it is basically the same thing I been there !

[RossCampoli]

It’s so difficult but you MUST try to ignore emotion as much as possible when following your predefined stock investment plan. Stay true to your plan.

[kolbefreney]

Watching in 2021 safe to say u shoulda bought that bitcoin 😭😭

[ronanm]

Jeez this is actually a great channel. Comprehensive advice without preaching, good editing and well spoken. Professional

[timmytheimpaler]

I sell my stocks whenever I want... YOUR NOT MY MOM

[JustShootLight]

I love that your example of “Tesla not having affordable cars is already just 9 months after you said it is becoming false. They announced a 25K model, which is AMAZING! Crazy how fast technology moves.

[imperviouus]

Not kidding you’ve been my favorite channel for the past 3 months.

[stevensevert]

Between the explanation of the P/E Ratio and your recommendation for the percentage of the portfolio, there was some great advice in here.

[thegogo]

I just sold my Tesla stocks from over $500. I bought them when it was $258. Right after I have bought the stocks Tesla started falling. I didn’t panic. So here I am. I doubled my 258 US dollars. 😅

[Chandrakumar_N]

Love his cheery attitude coupled with good solid knowledge