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The ultimate investment strategy: When to sell your shares

by , 08 December 2014

You probably know that emotions are an investor's worst enemy. So in order to invest profitably in shares, you need to have an investment strategy in place that overrides them.

You might have heard of a trailing stop losses. Trailing stop losses are a great way to keep your emotions at bay by having strict levels that you sell a stock at.

But what if you could improve this strategy?

Read on to find out more…

An investment strategy that yields results

A successful investment strategy all comes down to good risk management. A lot of investors don’t see this as a priority when they invest. And that’s their downfall.

The thing is, not losing money is the best way to make money in the first place.

And to achieve this you need to have an effective investment strategy and the discipline to stick with it.

Part one of the ultimate investment strategy – trailing stop losses

A trailing stop loss is when you sell your shares in a company when the price hits a specific percentage below the market price. If the share price rises, the stop loss trails it higher.

For example, you buy shares in Company ABC at R100. You set a 20% trailing stop loss. If the share falls to R80, you sell.

If the share price climbs to R150, then falls to R120, you sell.

Part two of the ultimate investment strategy – ask yourself why

You need to change your mind-set so that you think about how not to lose money, not make it.

You need to check that the reasons you invested in a company in the first place are still there. If they’re not, it’s time to sell, Keith Fitz-Gerald in Total Wealth explains.

You could ask yourself questions like:

  • Is the CEO the same and do you like what he’s doing as leader of the company?
  • Is the company part of something that could change the industry?
  • Are there competitors that could derail the success of the company you have money in?
  • If you don’t want to buy the share today, why are you not selling?

These questions depend on you and why you invested in the first place.

You want to ensure that you’re invested in the right companies for the long-term for the right reasons.

So there you have it, when to sell your shares.

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The ultimate investment strategy: When to sell your shares
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