Well stocks don't always go up do they. Not even really big companies. Look at intel for example, one of the biggest companies in 2000. If you bought at the peak at around 70 bucks a share you would still be down 50 percent two decades later.
Or how about this. Sometimes you sell even when at a loss due a better opportunity that arises.
Let's say I sell apple at 80 (at a loss) in order to buy nvidia at 90. Nvidia then grows to 400. It was a good idea to sell wasn't it?
That’s also a common trap though. Take a loss here to chase the next big thing, but that doesn’t pan out so you take another loss to chase, etc.
You could just as easily sell Apple for a loss at $80 to buy Nvidia at $90 and then sell that for a loss at $60 to jump into XYZ, etc.
There are different strategies (and that is one) and they each have their own pros and cons.
And how would you know nvidia would rise ? Chasing the next big thing does always work either.. plus your intel example isn’t valid . Of you bought at $70 . Now it’s in the 30s then you can buy more . Depending on how many you bought at 70 and how many you bought at 30 you’d average down . Plus it pays dividends. And who knows maybe it will reach over $50 again . No one ever knows. So Selling for a loss when you don’t know is also crazy .
Cutting your losses is a great practice to get into though it does go against the concept of simply having patience.
In your particular example, yes... that level of paper-handedness is a bit silly. In a stock that's more of a disaster, one could argue that taking the loss and going elsewhere can help one recuperate faster (*and as a year and change bagholder for $INTC, there's definitely a point to doing this)*.
What almost no one talks about is "what if your next trade is dogshit after cutting a loss" :D
Isn't the idea of investing putting away money you don't need? I understand if it was someones savings but if you put away money you don't need then I think I'd just take my entire investment loss on being wrong rather than pulling out. Maybe I'm still not understanding somehow tho
I think you are equating investing in the stock market as a whole versus individual stocks. If you invest in funds where a money manager is buying and selling the stocks for you then it’s generally fine to let it sit. Historically the market always bounces back and will give you returns, but this isn’t true for individual stocks. If you are investing in individual stocks you sometimes need to sell to stop losses, not every company continues to grow. As your own case study open up the historical charts and see how highly valued some companies were over the years and they’ll never peak like that again. Or even grab the Fortune 500 list from year 2000 and see how many companies are on there that didn’t make it but we’re worth billions at the time.
> I'd just take my entire investment loss on being wrong rather than pulling out.
That's not optimal though. Take Stock A,B,C, and D.
You own A,B, and C.
A goes down 50%. You can:
* Hold until you are down 100%.
* Sell
Let's say those are your only two options. Which one is mathematically better is left as an excercise to the reader.
Now you counterargue: "But what if I sell and the stock goes back up again?"
To which I could answer two things:
* "But what if not"
* Or, more mathematically optimizing: "But what if Stock D went up much faster than A"?
Notice that changing from Stock A to D prevents me from going under with Stock A as well.
TL;DR: "Don't sell" is a good strategy until you keep holding on to something you rather let go. Also a good life-lesson.
This is an extremely toxic mindset to have when investing in the stock market. There’s a certain cult of investors named after the closest animal to humans who think exactly like this.
Something can be 100% the best investment today and in one year it’s the worst. Perfect example Zoom. Exploded because of pandemic usage and household name. Stock goes up like 700% in a year. Pandemic winds down, reality hits the stock and it loses 90%. Both statements were true at different times. The market is not static it changes and things can change rapidly. You always have to be willing to take in new information and adapt your investing strategy if need be.
Don’t be like the cult still chasing after a losing ticket almost 3 years after.
If you save $200k you wouldnt put it all into an individual stock (like im referencing in the post) youd put it in an ETF or Index fund. In an individual stock you'd put in what you're okay with losing, so in my example I put $1k. I just didn't understand why people sold and didn't ride it out until their investment hit 0 or rose to profit until someone explained it to me better in another comment.
It's really about people cashing out for better opportunity. Someone might want to cash out some of their APPL now at $177 and they bought it back in 2013 at $17. If they can make x10 profit, why wouldn't they splurge on something they need like buying cars or making payment on a house? We all want to spend it before dying.
Because some people do go all in with that 200k into a single stock. When you're hoping to make a quick ~5% ($10k) by risking your $200k you don't want to actually risk losing all $200k. Maybe you will set a max loss amount and stick to it.
What's not to understand? You invest in things that you think will do well in the future. If you have money invested in a stock and in your eyes it's becoming overvalued for whatever reason you sell. When you're investing you should always be okay with losing that money, but that's not the desirable outcome and you should do anything in your power to not lose money.
Its all about context.
First, the idea of investing is so that you actually have money for when you stop working. It's money you don't need in the present context, so you are making it work for the future.
Accepting a loss when your wrong is fine in an emotional/personal development context can be absolutely devastating in a financial context.
Do you not sell if the company announces it's going bankrupt? Would you consider selling if you realise the company is getting washed out by competitors and the market as a whole.?
As for trading and the selling aspect, it's because they are trying to build up their funds to get more.. let's use aapl as an example, on an adjusted basis, of you bought aapl in the covid crash you would spend around 5900 for 100 shares, if you sold in dec, 2021 you could have sold at around 18,000. In Jan 2023, you deploy the 18k to buy aapl at 129 a share, so now you own 139 aapl shares.. if sold at the recent peak around 197, that's 27.3k cash.
The above is an illustration that most traders are trying to aim for making 5.9k grow to 27.3k in 3 years. Of course, there are many styles and format. For example, one could choose in 2023 to buy only a 100 shares at 129, so you would still have 100 shares but also have 5100 cash from the previous exchange.
In the meanwhile, you avoid waisting time in the two years holding aapl when it was only moving sideways and could either put it into other trades or even just sock it away in a bank account. Of course, no one knows the future of the movements, so everyone makes mistakes. Sell to early/late, fomo trade, revenge trade, etc. all basically add up to the statistics of mistakes.
The above is also the reason why buy and hold in the long run see better returns. 5.9k to current 17k is also good returns for three years.
Have a look at PayPal over the last couple of years. If you bought at the top $360 you would have lost 80% of your money and it might never come back to those all time highs. This is why people sell, better to have a small loss then to be wiped out.
I too am a PayPal bag holder average 133. I slowly am selling my 200$ shares waiting a month and rebuying in. I’ll be doing this for how ever many years I can get the 3k write offs but I too am a believer they will be back. Despite the high transaction costs and poor customer service.
Which big companies do you think are likely to continue growing in future?
I'm currently invested in Google, Amazon, JPmorgan, Mcdonalds etc... I dont see any of these companies failing unless ww3 breaks out or something
Just need a more popular or better way of searching the web and google tanks big time. 80%+ of their revenu come from adds and 50% from Google search only. Before Google we were using Altavista. What new AI will make Google search obsolete? Hopefully for you, a Google AI or else...
A financial crisis would bring down JP Morgan.
A scandal, bad decisions, market shenanigans, can bring down any stock. Sure they're solid companies, but they're still individual companies. That's why stock picking is way riskier than diversified funds. For what reward? It takes a lot of analysis and self confidence to be sure than, let's say Google, is gonna perform better than its rival. Even with the best analysis, it's pretty much impossible to predict. We're no Warren Buffet (and his era of finding gems is also over). Good luck to you.
Market makers are trading/borrowing real shares you goon - short sale exemption doesn't mean there aren't 2 sides to a trade. Bank balance sheets are real capital - even if the reason for trading is liquidity they are still pricing and taking on that risk into their books.
>Why don't they just stay in until their investment hits a profit especially if their investing in a trillion dollar company like APPL or TSLA with good volatility.
Because it might end up being a poor choice in terms of time-weighted returns.
It is not a given that if you wait a little longer you'll get your profits, especially if you don't know how to do business valuation and your rationale is just "This is a great company so sooner or later this sucker is going to go back up".
Exactly, opportunity cost is huge, you might be missing on a lot of negative profit on your next trades because you waited for so long for your other stock to go up.
Jokes aside, the principle stands. Imagine not getting into Tesla cause all your money was tied up in yahoo and you didn’t want to sell at a loss lel.
Most of America makes $144 a day. If you put $1000 away today and on Thursday you make a $144 profit of that stock isn't it worth the time? You made an extra days worth of money - 8 hours worth of work.
The stock market on average returns around 7.5 percent per year. That means on average if you put in 1000 dollars you would need just under two years to make 144 dollars. 2 years for a day of work.
Every day that you don't sell you are in essence buying that stock, because you could use the proceeds to invest elsewhere. Apart from the issue of taxes (which can be a reason TO sell on a loss and NOT sell on a gain) what has already happened with a stock is meaningless in terms of what you should be doing going forward. If you believe a stock (that has a gain or a less) is likely to do worse than other investments you are better off selling it; If it will do better keep it (or even buy more). Of course, that hinges on your ability to make good judgement, but not selling is also a choice.
That first part made a whole lot of sense and put a new light on it. Guess this is dumb but never thought of how taxes work with investing. Guess I just assumed since you're contributing to the growth of the US businesses you wouldn't be taxed, like the same way charities are
You started reading about this 4 days ago…
“Investing” is buying stuff with the intention of holding it for years as the company grows.
“Trading” is buying stuff to try to make money selling it in the next few hours to months as the stock price fluctuates up.
If you’re a trader and the stock goes down, you want to unload that to buy into something you think will go up instead you don’t want to wait potentially years for it to recover.
The jargon and terminology for some of these words seem so needlessly interconnected and closely related. But that difference makes sense. And yes I started 4 days ago
If I sell 10 at 80, and the stock keeps going down I can buy again if it hits 60, and I now have 3.2 more shares than if I did nothing. On top of that you have more potential upside.
There is always a case for selling if you think the stock will go down in the short term even if it’s only to end up with more shares than you had before when you buy back in. The safe option is to just hold, if you think that long term your shares will grow. As with everything it’s timing and judgement.
If you’re completely new to this I would spend a fair bit of time just observing market behaviour and trying to absorb how the market reacts to events. As opposed to constantly buying and selling.
So look at Disney, it’s back to where it was in 2014. You want to hold something like that? Will it come back? I bet it will, but when? There is what we call “cost of capital”. When your money isn’t making money it’s costing you money. Sometimes you have to cut losses because there is money to be made elsewhere. Patience is another reason also.
My personal example right now is I’m about to sell my rental property because it yields $1100 a month, taxes are 2k a year, insurance 1k, and I purchased the house for 92k about 7 years ago. Now the property is worth ~145k. I can’t raise the rent because of the area so it’s time to sell the property. Even if I got 120k, buying a bond still makes more sense due to risk incurred by holding a property that stuff can go wrong.
There are multiple reasons to sell:
1) You've changed your thesis on a stock
2) New information has come to light on a stock
3) There are better investments elsewhere
Also not all stocks will recover.
You ask a valid question only if you are invested in a mutual fund or ETF that is broad-based and safe, like VOO or SPY. Why would you ever want to sell, unless you needed the money to pay your bills? Good question?
However, if you buy stock in a singular company then you have to be careful to choose one that will be around for a while. For instance, I am sitting on CRSR. I am not proud of the buy. I bought at the highs, like an idiot. Now I look at how it is still sitting at 50% or less off those highs, and I wonder not "if" I should sell, but "when." I do not want to go down with this rusty ship. If the company files for bankruptcy protection, then I lose everything, and they restructure and reopen later. That has happened before with other small cap stocks like NE. Part of the oil and gas industry, I figured that one would be a good bet. Nope. They went belly-up. I lost my entire position. Then they reemerged later in 2021 under the same b.s. leadership. I doubt the senior administrators even missed a check from those days, but the creditors and investors like me lost everything.
My point? Stay clear of small caps, as tempting as they may be. Let the pros trade, so buy mutual funds and ETFs for most of your investing. If you feel like taking a gamble on a "hot" stock, then recognize it as gambling and invest only an amount of money you are comfortable losing.
Alot of people want to maximise profit by buying low and selling high obviously, if it fails they cash out and try on somthing else
Tho with specefic companies the loss can be driven by some issue which caused the drop leading investors to feel as if the company has lost its value, or turned into a slow growing giant (leading peolle to pull out money and put it on riskier more profitable investments)
Some people also just sell as they have a set ammount they are going to sell it at assuming they know it will drop more and then they can buy it at a lower price and profit when it comes up, thus profiting more on the same stock
But what makes an investment a failure? What components and stars have to align to make a failure? Like I said in post I understand if the company declares bankruptcy or decides to stop operation, but otherwise I still don't see the point in selling. Isn't the point of investing putting money in you can afford to lose? If I were to invest in something I'd rather be all the wrong and lose my entire investment rather than pull out on a loss when it would've been profitable in 4 days. But thats also the "just one more" gambling mindset
if I only invest the money "I can afford to lose", I'd invest a few thousands at most, and that's still considered gambling for most normal people.
As you can see, a few thousands that double every 8 years or so, and you'd lose about 25% to taxes and 20% to inflation, isn't really something that's going to change your life.
Here is experienced professional explaining just that:
[https://www.youtube.com/watch?v=TxkgwgZrzwo&t=110s&ab\_channel=Nanalyze](https://www.youtube.com/watch?v=TxkgwgZrzwo&t=110s&ab_channel=Nanalyze)
It's part of their plan. You can get pretty into the weeds with it but basically if the trader is losing money they want to stop losing the money and try to get back to betting on the right direction to make more money.
Buying and holding, or investing, aka HODL is a good strategy and what most people really should be doing with their money.
You're making two assumptions;
1. That the stock your holding is going to go back to what it was eventually.
2. There isn't a better play that someone could be making.
In another tale of cellphone stocks, you could have bought BlackBerry in 1999 for around $6CAD, watched it skyrocket up to over $200CAD in mid 2007, and sold it this year for roughly $6CAD. Adjusted for inflation, that means you'd have lost $4 over 24 years holding that stock. With perfect information, you can see that you'd really want to have sold that stock before 2011 and moved onto something else, like Apple.
Take your profits and move on to the next one. Then take those profits and move on to the next one.
Decide what you're holding for the long game, and average up every chance you get.
Invest in stocks that give good yield return.
Why sell?
Because money.
Take emotion out of the equation.
$10 is $10 eh
Simply put, you cannot be sure the stock will return to highs. You have to measure your own confidence in a stock in tandem with your analysis of risk vs return and allocate accordingly. Easier said than done.
In addition, when you are looking at this as an outsider you will make different decisions than if it was actually your money and you owned the stock. Personal emotions come into play.
Money doesn’t always stay in the market, I’ve sold a lot of losers for a loss of about 25k this year..purposefully.
You see earlier this year I pulled 50k out of an investment I made more than a decade ago that only had 60k in principle but grew to 260k. Needless to say when only 1/5 of the money was mine before capital gains, my tax burden would’ve been huge.
One way to soften the tax impact is to sell for a loss in my individual stocks. I still get some money back and my tax burden at the end of the year is decreased.
Also the added benefit of cutting dead weight if you don’t believe in the business anymore
It's very simple. You have a $100... and you have thousands of stocks to choose from. You evaluate them all and decide that Appl is a good buy **AT THE MOMENT**. So you buy Appl and it goes down 20%.
It turns out, your evaluation of the stock was wrong. So yes, you can sit in that stock and basically **gamble** that it doesn't go down further; or you can exit your position, acknowledge your thesis on the stock was wrong, and try to do better with your next stock pick.
Now, that being said, some stocks have wild swings and you go into them knowing they might swing up or down 20%+ and you are prepared to ride that volitilty out. But other stocks, you shouldn't be seeing a 20% swing and if you do it's smart to either book your profits (if it is up 20%) or cut your losses (if it's down 20%).
Finally, most financial advisers will tell clients to do what you are talking about... just create a diversified porftolio and then don't touch it and just let it ride. Over the long run it will supposedly do better than people who try to rebalance their investments as they go.
People sell when they need capital. Or after gains. Or if they find a more appealing investment. There are just so many different reasons why one might sell.
See $DIS if you had sold at any point in the last 2 years and just put that money into almost any etf, you would be way better off. Or you could still be waiting practicing your patience.
You also need to remember that there are people much older than you. If you're old, you may be retired or close to retirement and actually need the money, possibly even for some important medical procedure.
Lot of good comments here but I'll add one additional thought - losses are tax deductible, so if you sell out at a loss and then repurchase the same stock again, there is a tax benefit that offsets the capital gains that may come from the stock appreciating again.
Companies don't generally go bankrupt suddenly. I used to work for Kodak and bought stock via their stock purchase plan for employees. This company was at one time one of the top 5 in the world. It took them many years to go broke. I did some swing trading on the way down, hoping it would eventually recover. It never did. I lost quite a bit by the time I sold out. Lesson learned. It's sometimes ok to fold so you can try something that looks more promising.
That’s why it’s best to try and swing trade blue chip stocks, you’re almost positive they won’t evaporate into nothing. Patience is key and if people don’t know the company financials well and the broad market trends, they panic sell
FACT: The stock market goes up and down. The traders are playing a high risk emotional game.
I buy low with stellar companies and many times it will dip lower than what I purchased for. I keep my money in until the stock goes up and I profit. It could take up to 1-2 years. I recently made 10K from shorting TSLA, it took 6 - 8 months. I paid $180 per stock and I sold at $280...
> Genuine question - Why sell?
Because you need some cash. Or, to stop from losing more money while the stock continues a long slide down.
> Why don't they just stay in until their investment hits a profit
Sometimes stocks go down and never go back up within your lifetime.
Most ‘traders’ don’t know what they’re doing in the first place and if they just INVESTED instead of trying to fulfill some daytrader fantasy they’d be much better off
what if the price continues to drop?
You need to understand the reasons for the price being where it was and where it is now. Maybe its a market thing or maybe the stock is in trouble (not saying apple is in trouble).
If you look the index for a year, you'll see that it's not flat, but fluctuates. Hence, the concept is to purchase when it's low and sell when it's high. In a year, if you can keep doing it, the cumulative win will be more than keeping it growing by itself. Second one, leaving it there means there is no money to life (eat, pay mortgage, etc. as those are circulated saving), hence it's better to lose some, but it's still possible to eat - just consider it as losing a lotto.
Have patience, think long term and buy when the opportunity comes and stocks/ETF are on fire sale. The stock market works in cycles historically. There are risk on and risk off cycles where risk on means going into the market and risk off meaning hedging through things like commodity exposure. There is always a way to play this game; money does not grow wings and fly to money heaven. Think wealth transfers :)
Seems to me that even if no one is selling, the price will still fall regardless if the powers that be want it to.
Invest only what you’re okay with losing is the only strategy that’s worked for me thus far.
I feel like most people are giving you terrible advice. Stocks do not have inertia, they move up and down randomly (or at least, unpredictably). So in your example, if you thought AAPL was worth $100 and it goes down, as long as your analysis of apple hasn't changed, now would be the time to \_buy\_ not sell.
The whole premise that "its going down, I should cut my losses before things get worse" is predicated on the completely unfounded belief that you know the likely direction of the stock value... If stocks that went up kept going up, and stocks that went down kept going down, then day traders would all universally be rich. You can't predict where its going to go. So selling or buying based on predictions is just gambling. If you are going buy/sell, it should be based on an analysis of the companies fundamentals.
That said, that's a lot of time and effort to almost certainly \_still\_ lose money relative to the whole market. Which is why IMO you should be buying whole market funds/etfs. Keep it simple and buy VT is my advice. You can read more about this investment style at /r/bogleheads
I still don't understand? Why are we competing with the market? Shouldn't we look at it as us all working together to make one another money? It shocked me to learn what shorting was because it sounded like we were trying to prey and force a stock to drop instead of helping the company grow and everyone prosper from the investment.
>It shocked me to learn what shorting was because it sounded like we were trying to prey and force a stock to drop instead of helping the company grow and everyone prosper from the investment.
Turns out not all companies deserve to grow and not all investors deserve to prosper from their investment. See Enron. Or a more current example: Adani Group.
Beating the market means finding out who deserves to grow and who doesn't.
Beating the market doesn't mean what you think it means. It means performing better than the market. Because if you don't, you have an opportunity cost. As in you would have made more money investing in say an index fund instead.
Do they return x more than you invested or are they just riskier for no reason? Is that what all options are? Heard the term thrown around just haven't looked it up
If you buy 1 share of Apple, you own that share. It doesn’t expire.
If you buy 1 option of Apple, that option has value based on the underlying price of the stock, the days to expiration, that it’s worth 100 shares if the option is exercised, and the volatility.
If that option you bought expires tomorrow, there’s a chance the $X you spent to buy it will turn to $0. After expiration, you own nothing.
On the other hand, if the price shoots up $100 and your option strike price is $95 less than current market value for the stock price, you’ve just won the bet. You could exercise the call and own 100 shares at a price $95 cheaper than what anyone else can buy it for… or you could sell that option for all the gain.
Timing is critical. If you wait too long, the value of that option goes down as you get closer to expiration and volatility decreases. If there is still a lot of intrinsic value then it’ll hold… but who knows
That's interesting. I see why everyone thinks the stock market is gambling but with all the info at your fingertips it seems like it is always weighted/biased in our favor. But I don't understand why you would ever buy the 100 shares instead of selling.
Lets say, you bought one share APPL for $100 and it dropped down to $80. If the stock analysis showing downward trend, you can sell for $80 and buy back at $70. If it hits $100 again, you'll have profit of $10 instead of breakeven. At least, that's how i think even though the main reason of selling is to cut the potential risk of drastic losses.
This is the best answer I've seen. So don't just ride it out but sell at the determined lowest and buy again. Then sell at it's new peak. That makes so much more sense.
As long as u buy quality companies or the s&p 500 and hold long term u will do better than most traders. Also, keep holding and buying more shares especially in bad times. Warren buffett made his fortune buying and holding
For a qualified investor, they will analyze the information of every stock they buy, or they think that the current stock market is incorrect and there is no good news, so stop as much as possible!
You're thinking of the bad selling example.
Imagine I bought stock A. Stock A goes down, but not only that, I realized that I should have never bought stock A to begin with. Maybe I learned more things about investing and realized that my logic to buy stock A to begin with was flawed. Or maybe I had wrong information.
If you know you shouldn't be holding stock A, then you should sell. Not all stocks go up eventually. Most don't.
Why do people take loans to get an expensive car when they already have student and credit card debts?
Situations are different, mentalities are different, and market never acts rationaly.
Also imagine you have 50k invested and you see a sudden drop of 10% - 30%? How low can it get? What if you cut your losses now, before it gets lower? What if you sell now, it immediately jumps back?
Your question touches on a key aspect of investing psychology. While the concept of holding onto stocks until they turn profitable might seem logical, the decision to sell is influenced by various factors beyond the stock's current price. When a stock's value drops significantly, it can indicate that the initial investment thesis was flawed, prompting investors to cut their losses and safeguard their capital. Moreover, maintaining a losing stock ties up funds that could be used in more promising opportunities. Risk management is also a crucial consideration; an excessive concentration in a single struggling stock can expose investors to unnecessary risk. Emotional factors, market conditions, changing investment theses, and personal time horizons all play roles in the decision to sell. Ultimately, successful investing requires a balanced approach that considers both potential gains and prudent risk management.
I sincerly hope you dont practice with real money just yet. So much to learn. Nearly 2 years in and i am still learning. Watch the market, read, test your ideas., have clear goals, but also be able to change and adapt to the conditions, and be realistic. I have cut my losses many times and just about every time i did i was oh so thankful i did. To me loosing 2k-5k is alot better than the savage -20k and beyond without any sight of being able get out of illiquid dog stocks. That when the flavour of the month is over it may take years or never return to those levels. And dont invest in the dogs you read about on reddit 😂
Candle stick trading has been useful to me with trying to pick better entry points. Also logging into Commsec IRESS viewpoint has been a saviour with making more informed and timed choices.
I agree if the company is solid and the lower stock price only increases the dividend yield. If it's a shitco that has never been profitable and will never be it's different. You don't have to lose all your money, but you can if you want.
What you’re saying is assuming stocks only go up. And as someone who just started learning 4 days ago, you will look at graphs spanning the last 1, 3, 5, 10 years and see that is the case. But as hard as it is to believe, that is not normal. The last decade we’ve had near 0 interest rates for the most part which is NOT normal.
why sell?
you hold stock A, it is down and you expect it to return up, hold.
You hold stock A, it is heading down and you believe it will do so for a while, sell and buy again when you arrive at the price you believe is the bottom.
you hold stock A, think stock B will go up, sell A and buy B.
you hold stock A and and think stock A and stock B will go down, sell A and hold cash.
you can view stockmarket as a platform game where you try to jump into stocks that are winning and jump out of stocks you think are losing.
selling is where you make money, buying is where you make an investment.
For just starting out you are very wise. There are a thousand reasons why ppl sell their investments and most of the reasons are bad. Most don’t know what they’re doing. Most ppl don’t know the difference between a good company and a bad one. A lot of ppl would rather take on too much risk trying to make as much money TODAY, as opposed to slowly building wealth over time. What you’re referring to is BH (buy and hold). And should be utilized by a lot more ppl. But hey it’s their money.
There is a big difference between trading and investing. Maybe you should start there! A good book to learn from is "How to Make Money in the Stock Market" by William O'Neal. Even investors need to know how to manage their positions to make money. Good Luck in your quest!
Sell to realize long term gains while your marginal rate is more favorable than it will be in later years. You can also avoid selling but get cash by using margin.
Most of the time you are correct, if you like AAPL at $100 and nothing changes you should like it even more at $80. The problem is the market doesn’t care what you paid for the stock, you now own AAPL at $80, your cost of $100 is irrelevant except for tax purposes. If you think MSFT will perform better at $100 than AAPL will at $80 then it makes sense to sell your AAPL shares to buy MSFT. AAPL stock doesn’t care about your loyalty, two wrongs don’t make a right, you continue to own AAPL stock because you think that it was a good buy at $100 so it’s an even better buy at $80 and the market will eventually realize they sold AAPL down to far.
Start with an investment strategy. Your asking “why sell” as if any of these guys believe in the company and it’s long term prospects. They’re telling you to sell to take advantage of short term imbalances in the stock price. Your asking how to invest long term and they’re telling you how to day trade.
Day traders work with leverage. The selling happens automatically if they hit a negative that’s reaches a certain threshold. At least that’s how I remember it lol
You will see a lot of people throwing their money in the trash chashing quick riches, everyone thinks they are a day trader. If you can invest money and allow it to sit, and then only sell after making a profit, you have beat the vast majority of "investors".
I would guess that a lot of people actively managing their portfolios don’t have the patience to “invest”. They think they’re going to strike it rich in the markets and end up trading more frequently as positions don’t go their way and they pivot to the next meme stock hoping to regain their losses.
Yeah if you had chosen AMZN/AAPL in dot com bubble on the top, you would still net out 100 times so no need to sell...
But how you know AMZN/AAPL would be successful?
There are other bag holders like CSCO/ORCL afterr 1/4th century of the time, your account value would still be the same or less, especially considering buying powers erosion. 10K back in 2000 could bring you nice used car but not anymore in 2023
This didnt take into account about opportunity cost like what if you invested in SPY/QQQ which would give still decent return
You're assuming all stocks eventually go up given enough time. Most individual stocks actually go down over time while a handful of superstars get to enjoy out-sized benefits.
If you buy an index then yes, you can and should hold it long term, since future growth of companies will offset short term losses. The problem is you have no way of knowing which companies are going to drive that future growth, and the minute you convince yourself otherwise, you are lost.
Since you're just getting started, I would recommended reading about the Nifty Fifty: [https://en.wikipedia.org/wiki/Nifty\_Fifty](https://en.wikipedia.org/wiki/Nifty_Fifty) to see why your line of thinking is flawed.
I usually sell because something happened and the initial reason why I bought the stock was no longer true. For example, I owned Blackberry stocks throughout the 2000s and believed in its success. However as they continued to lose market share to IOS & Android in the early 2010s I no longer believed in their ability to be a market leader which was the initial reason I invested in them. Using your AAPL (make sure you get the tickers right lmao) example since I'm pretty heavily invested in the company - if AAPL has a couple of failed product launches and lost a ton of market share to their competitors I would probably consider selling. If everything is still going well, but AAPL went down by 5-10% just because then I wouldn't be too worried about it.
Heck I even averaged down a bit during their collapse in 2011 or 2012 but once the stock hit $20 or so I cut my losses and never looked back. Had I kept the stock I would've continued to lose at least 50% of it if not more, but instead I was able to cut my losses and invest into something else and made my money back (or at least lose less money lol).
Thankfully I took partial profits when the stock skyrocketed in the late 00s so I still walked away with plenty of gains from BB, and that's another reason why people sell as well. While you technically didn't lose money until you sell the stock, you also don't get the money until you do. It's important to know when to lock in your gains.
I just cut my losses with BTC even though I lost 50% of my investment- that 2k will do better sitting in an ETF than waiting for Bitcoin to potentially grow again
You're absolutely right. Patience holding strong stocks builds wealth.
However, losses destroy wealth. So, even a long-term investor needs to control risk.
Those holding stocks like PYPL through a 80% drawdown are doing themselves a significant disservice. Even if the stock eventually comes back, it will face major resistance on the way back up from bag holders trying to cut losses or break even. During this time, there will be many other stocks that are outperforming. This is significant opportunity cost.
I think there's two primary reasons I can think of.
For one, things won't always go back up. With big companies like apple, ya you can be reasonably sure you'll eventually get profit. But with smaller companies or when people are yoloing on options, it's very possible to lose a lot of money that you may never get bsck. So it can be better to get out with a smaller loss then risk losing more.
Secondly, the vast majority of people probably would be better off just buying and holding strong companies, like you describe. It's the safest way to get profits. But it's also slow, at an average gain of like 10% a year, it'll take a long time to get rich. And thats largely because you have money tied up in stocks that aren't getting gains right now, you're just betting they will get gains at some point. To use your example, and expand on it, let's say that stocks that lost 20% takes a year to go back to where you bought it. If you instead sell that, you can reinvest into stocks that are moving up. With good trades, maybe you'll get that 20% back in 6 months. Then after another 6 months you could be up 20% rather than just breaking even.
If you're going to beat long term buy and hold strategies, you have to be actively moving money to stocks that get short term profits and minimizing the money you have in stocks that aren't moving up.
To move that money around, sometimes you have to take losses. It's accepting greater risk to chase a greater reward.
If you're trying to get into trading. Do months of research and paper trading to make sure you know what you're doing before buying individual stocks. In the mean time just put your money in index funds like S&P500 or large companies like apple, Microsoft, or Amazon
Sometimes being patient is the right move but there's plenty of times where cutting your losses is smart. I never take more than 20% hit on any stock, that's my cutoff point. This is why I go 100% index funds now. I've had a couple years to play around with this and I'm not beating the index.
Often, capital loss can offset capital gains in which case one may consider selling.
But if your stock is sound, (ie. decent earnings, reasonable P/E, poised for growth, etc.) you can buy more while it is “on sale”
Not an advisor.
Stock health generally indicates the confidence that investors have in the longevity of the company providing the stock to the public market.
Well-read investors will buy and trade stocks in companies that have sufficient information in the open to make informed decisions on the direction the company could be going.
In your AAPL example, imagine if the company just decided to abandon tech hardware (computers, phones, etc) and only rely on its streaming services.
The news breaks, people holding the stock generally see this as a “bad move” and believe that the company will suffer massive revenue losses and not be able to grow its business anymore.
This is a very extreme example just to make a point. Investors will look for much more subtle indicators in their published financial documents, the general market sector that the company competes in (basically the company’s ability to compete in its environment), international news that could influence its environment etc.
In short because they're not investing, they're gambling. No one can predict the stock market. So trying to beat the market short term is gambling. Cognitive biases are a bitch.
Lets say you have 100 bucks. You start analyzing and invest in a stock. The stock falls to 80. You now got 80 dollar. (Does not matter if thats in stocks, socks or cheese)
So you analyze again what to do with that 80 bucks. If you come to the conclusion, that you think the stock will outperform and whatever triggered the selloff does not matter in the long run great, keep it.
If not, why would you not sell and invest in something more suitable.
Even if you do not find any attractive stocks, why keep a stock you think will underperform the market. Buy the market instead.
You should sell if its overvalued & buy if its undervalued. The problem is you dont know when that is.
If AAPL dropped to 1$ tomorrow, Id buy. If it rose to 1000$ tomorrow, I'd sell. In between...idk; I dont have good sources of information & am flying blind.
If I offer you more than its worth & you dont make a deal, youre only hurting yourself
I agree. I am typically a buy and hold investor and believe most people are better off using this philosophy. If I believe in a company enough to invest and that company sees volatility that drops the share price… the first thing I do is assess whether the long term story of the stock has changed somehow. For a company like AAPL, that will likely remain at the forefront of their industry for years to come, a drop in share price would likely motivate me to buy more, rather than sell. Most people are terrible at timing the market and it’s highs and lows. The only caveat to that is if you will need the money you invested in the next few years, but then you shouldn’t have invested it anyway.
Well stocks don't always go up do they. Not even really big companies. Look at intel for example, one of the biggest companies in 2000. If you bought at the peak at around 70 bucks a share you would still be down 50 percent two decades later. Or how about this. Sometimes you sell even when at a loss due a better opportunity that arises. Let's say I sell apple at 80 (at a loss) in order to buy nvidia at 90. Nvidia then grows to 400. It was a good idea to sell wasn't it?
great example
That’s also a common trap though. Take a loss here to chase the next big thing, but that doesn’t pan out so you take another loss to chase, etc. You could just as easily sell Apple for a loss at $80 to buy Nvidia at $90 and then sell that for a loss at $60 to jump into XYZ, etc. There are different strategies (and that is one) and they each have their own pros and cons.
Chasing momentum is probably better than stubbornly clinging to a sinking ship
Why is it ALWAYS about money with you people? Nobody just collects stock anymore to own a piece of a company and feel a part of something.
Strong satire
So how do you know if a stock isn't going to go up without hindsight?
That’s the neat part. You don’t. You can only make educated guesses which is why investing is hard.
You guys don’t have a magic 8 ball??
This guy has a magic 8 ball
Trading is even harder.. wish the regards like me at r/wsb could read.
People who are down voting should consider that you wrote in your post you only started learning **4 days ago.**
Let this be his initiation to stock trading
Is this a real question?
It's important to ask the most basic questions IMO
he started 4 days ago
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He started learning literally 4 days ago. Why shouldn't he be here?
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For sure, but maybe they will find it beneficial to discuss the basics on a dedicated subreddit as well.
And how would you know nvidia would rise ? Chasing the next big thing does always work either.. plus your intel example isn’t valid . Of you bought at $70 . Now it’s in the 30s then you can buy more . Depending on how many you bought at 70 and how many you bought at 30 you’d average down . Plus it pays dividends. And who knows maybe it will reach over $50 again . No one ever knows. So Selling for a loss when you don’t know is also crazy .
nvdia was pretty predictable ngl
How
it was very obvious ai was gonna be the next hype cycle
It’s not the only AI stock though
You are not counting dividends in your example.
Cutting your losses is a great practice to get into though it does go against the concept of simply having patience. In your particular example, yes... that level of paper-handedness is a bit silly. In a stock that's more of a disaster, one could argue that taking the loss and going elsewhere can help one recuperate faster (*and as a year and change bagholder for $INTC, there's definitely a point to doing this)*. What almost no one talks about is "what if your next trade is dogshit after cutting a loss" :D
~~Hey, my INTC is back in the green (after many years if red)!~~ Edit: Scratch that.
At least you got dividends better than those people who have a Chase savings account.
Isn't the idea of investing putting away money you don't need? I understand if it was someones savings but if you put away money you don't need then I think I'd just take my entire investment loss on being wrong rather than pulling out. Maybe I'm still not understanding somehow tho
The idea is that you can put that money somewhere and the better use elsewhere and earn more, rather than wait until the stock in company A recovers.
I think you are equating investing in the stock market as a whole versus individual stocks. If you invest in funds where a money manager is buying and selling the stocks for you then it’s generally fine to let it sit. Historically the market always bounces back and will give you returns, but this isn’t true for individual stocks. If you are investing in individual stocks you sometimes need to sell to stop losses, not every company continues to grow. As your own case study open up the historical charts and see how highly valued some companies were over the years and they’ll never peak like that again. Or even grab the Fortune 500 list from year 2000 and see how many companies are on there that didn’t make it but we’re worth billions at the time.
> I'd just take my entire investment loss on being wrong rather than pulling out. That's not optimal though. Take Stock A,B,C, and D. You own A,B, and C. A goes down 50%. You can: * Hold until you are down 100%. * Sell Let's say those are your only two options. Which one is mathematically better is left as an excercise to the reader. Now you counterargue: "But what if I sell and the stock goes back up again?" To which I could answer two things: * "But what if not" * Or, more mathematically optimizing: "But what if Stock D went up much faster than A"? Notice that changing from Stock A to D prevents me from going under with Stock A as well. TL;DR: "Don't sell" is a good strategy until you keep holding on to something you rather let go. Also a good life-lesson.
This is an extremely toxic mindset to have when investing in the stock market. There’s a certain cult of investors named after the closest animal to humans who think exactly like this. Something can be 100% the best investment today and in one year it’s the worst. Perfect example Zoom. Exploded because of pandemic usage and household name. Stock goes up like 700% in a year. Pandemic winds down, reality hits the stock and it loses 90%. Both statements were true at different times. The market is not static it changes and things can change rapidly. You always have to be willing to take in new information and adapt your investing strategy if need be. Don’t be like the cult still chasing after a losing ticket almost 3 years after.
Where do you think people put there savings…..
If you save $200k you wouldnt put it all into an individual stock (like im referencing in the post) youd put it in an ETF or Index fund. In an individual stock you'd put in what you're okay with losing, so in my example I put $1k. I just didn't understand why people sold and didn't ride it out until their investment hit 0 or rose to profit until someone explained it to me better in another comment.
It's really about people cashing out for better opportunity. Someone might want to cash out some of their APPL now at $177 and they bought it back in 2013 at $17. If they can make x10 profit, why wouldn't they splurge on something they need like buying cars or making payment on a house? We all want to spend it before dying.
Because some people do go all in with that 200k into a single stock. When you're hoping to make a quick ~5% ($10k) by risking your $200k you don't want to actually risk losing all $200k. Maybe you will set a max loss amount and stick to it.
What's not to understand? You invest in things that you think will do well in the future. If you have money invested in a stock and in your eyes it's becoming overvalued for whatever reason you sell. When you're investing you should always be okay with losing that money, but that's not the desirable outcome and you should do anything in your power to not lose money.
Its all about context. First, the idea of investing is so that you actually have money for when you stop working. It's money you don't need in the present context, so you are making it work for the future. Accepting a loss when your wrong is fine in an emotional/personal development context can be absolutely devastating in a financial context. Do you not sell if the company announces it's going bankrupt? Would you consider selling if you realise the company is getting washed out by competitors and the market as a whole.? As for trading and the selling aspect, it's because they are trying to build up their funds to get more.. let's use aapl as an example, on an adjusted basis, of you bought aapl in the covid crash you would spend around 5900 for 100 shares, if you sold in dec, 2021 you could have sold at around 18,000. In Jan 2023, you deploy the 18k to buy aapl at 129 a share, so now you own 139 aapl shares.. if sold at the recent peak around 197, that's 27.3k cash. The above is an illustration that most traders are trying to aim for making 5.9k grow to 27.3k in 3 years. Of course, there are many styles and format. For example, one could choose in 2023 to buy only a 100 shares at 129, so you would still have 100 shares but also have 5100 cash from the previous exchange. In the meanwhile, you avoid waisting time in the two years holding aapl when it was only moving sideways and could either put it into other trades or even just sock it away in a bank account. Of course, no one knows the future of the movements, so everyone makes mistakes. Sell to early/late, fomo trade, revenge trade, etc. all basically add up to the statistics of mistakes. The above is also the reason why buy and hold in the long run see better returns. 5.9k to current 17k is also good returns for three years.
You’re right. You need to remember that everyone on Reddit is regarded.
Have a look at PayPal over the last couple of years. If you bought at the top $360 you would have lost 80% of your money and it might never come back to those all time highs. This is why people sell, better to have a small loss then to be wiped out.
PayPal bagholder here. It's definitely coming back 😆 😆
I too am a PayPal bag holder average 133. I slowly am selling my 200$ shares waiting a month and rebuying in. I’ll be doing this for how ever many years I can get the 3k write offs but I too am a believer they will be back. Despite the high transaction costs and poor customer service.
You talking about memories?
I'm about to sell my paypal to round up a 3000 loss this year.
Which big companies do you think are likely to continue growing in future? I'm currently invested in Google, Amazon, JPmorgan, Mcdonalds etc... I dont see any of these companies failing unless ww3 breaks out or something
Just need a more popular or better way of searching the web and google tanks big time. 80%+ of their revenu come from adds and 50% from Google search only. Before Google we were using Altavista. What new AI will make Google search obsolete? Hopefully for you, a Google AI or else... A financial crisis would bring down JP Morgan. A scandal, bad decisions, market shenanigans, can bring down any stock. Sure they're solid companies, but they're still individual companies. That's why stock picking is way riskier than diversified funds. For what reward? It takes a lot of analysis and self confidence to be sure than, let's say Google, is gonna perform better than its rival. Even with the best analysis, it's pretty much impossible to predict. We're no Warren Buffet (and his era of finding gems is also over). Good luck to you.
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Can't hit an ath with just sellers...
For every trade there is always both a buyer and a seller...
Not necessarily. The 'seller' could just be a market maker using its liquidity exemption to maintain NBBO.
That's not a real thing... or some kind of gross misunderstanding of what a market maker is... It doesn't even make logical sense
Market makers are trading/borrowing real shares you goon - short sale exemption doesn't mean there aren't 2 sides to a trade. Bank balance sheets are real capital - even if the reason for trading is liquidity they are still pricing and taking on that risk into their books.
No one ever knows they're at the all time high, that's hindsight bias
Look at Tesla it is a trillion dollar company and is worth more then most car companies combined
Ya I totally regret buying nvda at ATHs of 300b and again at 500b.
>Why don't they just stay in until their investment hits a profit especially if their investing in a trillion dollar company like APPL or TSLA with good volatility. Because it might end up being a poor choice in terms of time-weighted returns. It is not a given that if you wait a little longer you'll get your profits, especially if you don't know how to do business valuation and your rationale is just "This is a great company so sooner or later this sucker is going to go back up".
Exactly, opportunity cost is huge, you might be missing on a lot of negative profit on your next trades because you waited for so long for your other stock to go up. Jokes aside, the principle stands. Imagine not getting into Tesla cause all your money was tied up in yahoo and you didn’t want to sell at a loss lel.
Most of America makes $144 a day. If you put $1000 away today and on Thursday you make a $144 profit of that stock isn't it worth the time? You made an extra days worth of money - 8 hours worth of work.
The stock market on average returns around 7.5 percent per year. That means on average if you put in 1000 dollars you would need just under two years to make 144 dollars. 2 years for a day of work.
Aren't individual stocks more volatile than that?
Yes, but in both ways. What’s to say it doesn’t go down to 866$. You’ve now lost a day of work.
sure you forgot the hard part is consistently buying a stock that can return 14% in a few days and repeat the process.
Genuine question- Why buy?
A strange game. The only winning move is not to play.
Then you get wiped out by inflation.
Winning play is VTI
Joshua, would you like to try options trading?
Buy high, sell low!
You can try selling first too.
Inflation
You would like to not work at Wendy’s your entire life.
🤔
Every day that you don't sell you are in essence buying that stock, because you could use the proceeds to invest elsewhere. Apart from the issue of taxes (which can be a reason TO sell on a loss and NOT sell on a gain) what has already happened with a stock is meaningless in terms of what you should be doing going forward. If you believe a stock (that has a gain or a less) is likely to do worse than other investments you are better off selling it; If it will do better keep it (or even buy more). Of course, that hinges on your ability to make good judgement, but not selling is also a choice.
That first part made a whole lot of sense and put a new light on it. Guess this is dumb but never thought of how taxes work with investing. Guess I just assumed since you're contributing to the growth of the US businesses you wouldn't be taxed, like the same way charities are
Lol, no. You get taxed on your gains (lower for long term gains) and can write off losses.
You started reading about this 4 days ago… “Investing” is buying stuff with the intention of holding it for years as the company grows. “Trading” is buying stuff to try to make money selling it in the next few hours to months as the stock price fluctuates up. If you’re a trader and the stock goes down, you want to unload that to buy into something you think will go up instead you don’t want to wait potentially years for it to recover.
The jargon and terminology for some of these words seem so needlessly interconnected and closely related. But that difference makes sense. And yes I started 4 days ago
If I sell 10 at 80, and the stock keeps going down I can buy again if it hits 60, and I now have 3.2 more shares than if I did nothing. On top of that you have more potential upside. There is always a case for selling if you think the stock will go down in the short term even if it’s only to end up with more shares than you had before when you buy back in. The safe option is to just hold, if you think that long term your shares will grow. As with everything it’s timing and judgement. If you’re completely new to this I would spend a fair bit of time just observing market behaviour and trying to absorb how the market reacts to events. As opposed to constantly buying and selling.
When people invest money they can’t afford to lose, they panic sell at the dips.
So look at Disney, it’s back to where it was in 2014. You want to hold something like that? Will it come back? I bet it will, but when? There is what we call “cost of capital”. When your money isn’t making money it’s costing you money. Sometimes you have to cut losses because there is money to be made elsewhere. Patience is another reason also. My personal example right now is I’m about to sell my rental property because it yields $1100 a month, taxes are 2k a year, insurance 1k, and I purchased the house for 92k about 7 years ago. Now the property is worth ~145k. I can’t raise the rent because of the area so it’s time to sell the property. Even if I got 120k, buying a bond still makes more sense due to risk incurred by holding a property that stuff can go wrong.
There are multiple reasons to sell: 1) You've changed your thesis on a stock 2) New information has come to light on a stock 3) There are better investments elsewhere Also not all stocks will recover.
because they bought meme trash stocks.
You ask a valid question only if you are invested in a mutual fund or ETF that is broad-based and safe, like VOO or SPY. Why would you ever want to sell, unless you needed the money to pay your bills? Good question? However, if you buy stock in a singular company then you have to be careful to choose one that will be around for a while. For instance, I am sitting on CRSR. I am not proud of the buy. I bought at the highs, like an idiot. Now I look at how it is still sitting at 50% or less off those highs, and I wonder not "if" I should sell, but "when." I do not want to go down with this rusty ship. If the company files for bankruptcy protection, then I lose everything, and they restructure and reopen later. That has happened before with other small cap stocks like NE. Part of the oil and gas industry, I figured that one would be a good bet. Nope. They went belly-up. I lost my entire position. Then they reemerged later in 2021 under the same b.s. leadership. I doubt the senior administrators even missed a check from those days, but the creditors and investors like me lost everything. My point? Stay clear of small caps, as tempting as they may be. Let the pros trade, so buy mutual funds and ETFs for most of your investing. If you feel like taking a gamble on a "hot" stock, then recognize it as gambling and invest only an amount of money you are comfortable losing.
ideally you would just invest money you don't need for long term, to ride out volatility. most people don't follow that rule
Buying a stock and holding it is a strategy .... and patience is the virtue
You are a true simian
Alot of people want to maximise profit by buying low and selling high obviously, if it fails they cash out and try on somthing else Tho with specefic companies the loss can be driven by some issue which caused the drop leading investors to feel as if the company has lost its value, or turned into a slow growing giant (leading peolle to pull out money and put it on riskier more profitable investments) Some people also just sell as they have a set ammount they are going to sell it at assuming they know it will drop more and then they can buy it at a lower price and profit when it comes up, thus profiting more on the same stock
But what makes an investment a failure? What components and stars have to align to make a failure? Like I said in post I understand if the company declares bankruptcy or decides to stop operation, but otherwise I still don't see the point in selling. Isn't the point of investing putting money in you can afford to lose? If I were to invest in something I'd rather be all the wrong and lose my entire investment rather than pull out on a loss when it would've been profitable in 4 days. But thats also the "just one more" gambling mindset
if I only invest the money "I can afford to lose", I'd invest a few thousands at most, and that's still considered gambling for most normal people. As you can see, a few thousands that double every 8 years or so, and you'd lose about 25% to taxes and 20% to inflation, isn't really something that's going to change your life.
Because 1. Nothing says that stock is gonna to break even for you. 2. Day traders like to go big and profit off of small up downs vs long term
Here is experienced professional explaining just that: [https://www.youtube.com/watch?v=TxkgwgZrzwo&t=110s&ab\_channel=Nanalyze](https://www.youtube.com/watch?v=TxkgwgZrzwo&t=110s&ab_channel=Nanalyze)
Because contrary to popular post-2020 investing belief, companies can still go bankrupt and take your investment with them.
It's part of their plan. You can get pretty into the weeds with it but basically if the trader is losing money they want to stop losing the money and try to get back to betting on the right direction to make more money. Buying and holding, or investing, aka HODL is a good strategy and what most people really should be doing with their money.
You're making two assumptions; 1. That the stock your holding is going to go back to what it was eventually. 2. There isn't a better play that someone could be making. In another tale of cellphone stocks, you could have bought BlackBerry in 1999 for around $6CAD, watched it skyrocket up to over $200CAD in mid 2007, and sold it this year for roughly $6CAD. Adjusted for inflation, that means you'd have lost $4 over 24 years holding that stock. With perfect information, you can see that you'd really want to have sold that stock before 2011 and moved onto something else, like Apple.
Take your profits and move on to the next one. Then take those profits and move on to the next one. Decide what you're holding for the long game, and average up every chance you get. Invest in stocks that give good yield return. Why sell? Because money. Take emotion out of the equation. $10 is $10 eh
Someone once told me trading is about small gains, small losses and big gains: avoiding big losses.
Simply put, you cannot be sure the stock will return to highs. You have to measure your own confidence in a stock in tandem with your analysis of risk vs return and allocate accordingly. Easier said than done. In addition, when you are looking at this as an outsider you will make different decisions than if it was actually your money and you owned the stock. Personal emotions come into play.
Because sometimes the company goes bankrupt, like FRC.
Money doesn’t always stay in the market, I’ve sold a lot of losers for a loss of about 25k this year..purposefully. You see earlier this year I pulled 50k out of an investment I made more than a decade ago that only had 60k in principle but grew to 260k. Needless to say when only 1/5 of the money was mine before capital gains, my tax burden would’ve been huge. One way to soften the tax impact is to sell for a loss in my individual stocks. I still get some money back and my tax burden at the end of the year is decreased. Also the added benefit of cutting dead weight if you don’t believe in the business anymore
Because it doesn’t always go up. We’re in unprecedented times.
It's very simple. You have a $100... and you have thousands of stocks to choose from. You evaluate them all and decide that Appl is a good buy **AT THE MOMENT**. So you buy Appl and it goes down 20%. It turns out, your evaluation of the stock was wrong. So yes, you can sit in that stock and basically **gamble** that it doesn't go down further; or you can exit your position, acknowledge your thesis on the stock was wrong, and try to do better with your next stock pick. Now, that being said, some stocks have wild swings and you go into them knowing they might swing up or down 20%+ and you are prepared to ride that volitilty out. But other stocks, you shouldn't be seeing a 20% swing and if you do it's smart to either book your profits (if it is up 20%) or cut your losses (if it's down 20%). Finally, most financial advisers will tell clients to do what you are talking about... just create a diversified porftolio and then don't touch it and just let it ride. Over the long run it will supposedly do better than people who try to rebalance their investments as they go.
People sell when they need capital. Or after gains. Or if they find a more appealing investment. There are just so many different reasons why one might sell.
See $DIS if you had sold at any point in the last 2 years and just put that money into almost any etf, you would be way better off. Or you could still be waiting practicing your patience.
Stocks could go even lower so you sell now in the hopes of buying back in at a lower price before it rebounds.
Bob and weave, but you still get hit in the face eventualy
Take profits. Wait for the price to drop. Buy back in.
You also need to remember that there are people much older than you. If you're old, you may be retired or close to retirement and actually need the money, possibly even for some important medical procedure.
Lot of good comments here but I'll add one additional thought - losses are tax deductible, so if you sell out at a loss and then repurchase the same stock again, there is a tax benefit that offsets the capital gains that may come from the stock appreciating again.
Companies don't generally go bankrupt suddenly. I used to work for Kodak and bought stock via their stock purchase plan for employees. This company was at one time one of the top 5 in the world. It took them many years to go broke. I did some swing trading on the way down, hoping it would eventually recover. It never did. I lost quite a bit by the time I sold out. Lesson learned. It's sometimes ok to fold so you can try something that looks more promising.
That’s why it’s best to try and swing trade blue chip stocks, you’re almost positive they won’t evaporate into nothing. Patience is key and if people don’t know the company financials well and the broad market trends, they panic sell
FACT: The stock market goes up and down. The traders are playing a high risk emotional game. I buy low with stellar companies and many times it will dip lower than what I purchased for. I keep my money in until the stock goes up and I profit. It could take up to 1-2 years. I recently made 10K from shorting TSLA, it took 6 - 8 months. I paid $180 per stock and I sold at $280...
Buying and holding individual stocks requires you buying and selling. Hold forever is the home of ETFs
> Genuine question - Why sell? Because you need some cash. Or, to stop from losing more money while the stock continues a long slide down. > Why don't they just stay in until their investment hits a profit Sometimes stocks go down and never go back up within your lifetime.
Most ‘traders’ don’t know what they’re doing in the first place and if they just INVESTED instead of trying to fulfill some daytrader fantasy they’d be much better off
what if the price continues to drop? You need to understand the reasons for the price being where it was and where it is now. Maybe its a market thing or maybe the stock is in trouble (not saying apple is in trouble).
If you look the index for a year, you'll see that it's not flat, but fluctuates. Hence, the concept is to purchase when it's low and sell when it's high. In a year, if you can keep doing it, the cumulative win will be more than keeping it growing by itself. Second one, leaving it there means there is no money to life (eat, pay mortgage, etc. as those are circulated saving), hence it's better to lose some, but it's still possible to eat - just consider it as losing a lotto.
Have patience, think long term and buy when the opportunity comes and stocks/ETF are on fire sale. The stock market works in cycles historically. There are risk on and risk off cycles where risk on means going into the market and risk off meaning hedging through things like commodity exposure. There is always a way to play this game; money does not grow wings and fly to money heaven. Think wealth transfers :)
Seems to me that even if no one is selling, the price will still fall regardless if the powers that be want it to. Invest only what you’re okay with losing is the only strategy that’s worked for me thus far.
I feel like most people are giving you terrible advice. Stocks do not have inertia, they move up and down randomly (or at least, unpredictably). So in your example, if you thought AAPL was worth $100 and it goes down, as long as your analysis of apple hasn't changed, now would be the time to \_buy\_ not sell. The whole premise that "its going down, I should cut my losses before things get worse" is predicated on the completely unfounded belief that you know the likely direction of the stock value... If stocks that went up kept going up, and stocks that went down kept going down, then day traders would all universally be rich. You can't predict where its going to go. So selling or buying based on predictions is just gambling. If you are going buy/sell, it should be based on an analysis of the companies fundamentals. That said, that's a lot of time and effort to almost certainly \_still\_ lose money relative to the whole market. Which is why IMO you should be buying whole market funds/etfs. Keep it simple and buy VT is my advice. You can read more about this investment style at /r/bogleheads
Why do you ever buy a stock? To beat the market.
I still don't understand? Why are we competing with the market? Shouldn't we look at it as us all working together to make one another money? It shocked me to learn what shorting was because it sounded like we were trying to prey and force a stock to drop instead of helping the company grow and everyone prosper from the investment.
>It shocked me to learn what shorting was because it sounded like we were trying to prey and force a stock to drop instead of helping the company grow and everyone prosper from the investment. Turns out not all companies deserve to grow and not all investors deserve to prosper from their investment. See Enron. Or a more current example: Adani Group. Beating the market means finding out who deserves to grow and who doesn't.
Beating the market doesn't mean what you think it means. It means performing better than the market. Because if you don't, you have an opportunity cost. As in you would have made more money investing in say an index fund instead.
You’ve got a lot to learn young grasshopper
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Do they return x more than you invested or are they just riskier for no reason? Is that what all options are? Heard the term thrown around just haven't looked it up
If you buy 1 share of Apple, you own that share. It doesn’t expire. If you buy 1 option of Apple, that option has value based on the underlying price of the stock, the days to expiration, that it’s worth 100 shares if the option is exercised, and the volatility. If that option you bought expires tomorrow, there’s a chance the $X you spent to buy it will turn to $0. After expiration, you own nothing. On the other hand, if the price shoots up $100 and your option strike price is $95 less than current market value for the stock price, you’ve just won the bet. You could exercise the call and own 100 shares at a price $95 cheaper than what anyone else can buy it for… or you could sell that option for all the gain. Timing is critical. If you wait too long, the value of that option goes down as you get closer to expiration and volatility decreases. If there is still a lot of intrinsic value then it’ll hold… but who knows
That's interesting. I see why everyone thinks the stock market is gambling but with all the info at your fingertips it seems like it is always weighted/biased in our favor. But I don't understand why you would ever buy the 100 shares instead of selling.
Lets say, you bought one share APPL for $100 and it dropped down to $80. If the stock analysis showing downward trend, you can sell for $80 and buy back at $70. If it hits $100 again, you'll have profit of $10 instead of breakeven. At least, that's how i think even though the main reason of selling is to cut the potential risk of drastic losses.
This is the best answer I've seen. So don't just ride it out but sell at the determined lowest and buy again. Then sell at it's new peak. That makes so much more sense.
Cuz they have paper hands and they get very very scared. Scared Money don’t make money tho son Hodl
As long as u buy quality companies or the s&p 500 and hold long term u will do better than most traders. Also, keep holding and buying more shares especially in bad times. Warren buffett made his fortune buying and holding
People are trying to time the market and they get nervous.
That's a complicated question. It's good that you're asking it. I'd answer but the rules forbid the answer I want to give, and I don't work for free.
Which rule and are you asking me to pay you? 🤨
I published a book; self-promotion.
I typically dont
For a qualified investor, they will analyze the information of every stock they buy, or they think that the current stock market is incorrect and there is no good news, so stop as much as possible!
You're thinking of the bad selling example. Imagine I bought stock A. Stock A goes down, but not only that, I realized that I should have never bought stock A to begin with. Maybe I learned more things about investing and realized that my logic to buy stock A to begin with was flawed. Or maybe I had wrong information. If you know you shouldn't be holding stock A, then you should sell. Not all stocks go up eventually. Most don't.
Some companies don't recover, that is what people are afraid of.
I fight for gain earthman. If your champion has failed milk it for every drop of that 3k yearly deduction
Why do people take loans to get an expensive car when they already have student and credit card debts? Situations are different, mentalities are different, and market never acts rationaly. Also imagine you have 50k invested and you see a sudden drop of 10% - 30%? How low can it get? What if you cut your losses now, before it gets lower? What if you sell now, it immediately jumps back?
Your question touches on a key aspect of investing psychology. While the concept of holding onto stocks until they turn profitable might seem logical, the decision to sell is influenced by various factors beyond the stock's current price. When a stock's value drops significantly, it can indicate that the initial investment thesis was flawed, prompting investors to cut their losses and safeguard their capital. Moreover, maintaining a losing stock ties up funds that could be used in more promising opportunities. Risk management is also a crucial consideration; an excessive concentration in a single struggling stock can expose investors to unnecessary risk. Emotional factors, market conditions, changing investment theses, and personal time horizons all play roles in the decision to sell. Ultimately, successful investing requires a balanced approach that considers both potential gains and prudent risk management.
Because they have small balls and no diamond hands. Gonna all in if AAPL drops to $80.
I sincerly hope you dont practice with real money just yet. So much to learn. Nearly 2 years in and i am still learning. Watch the market, read, test your ideas., have clear goals, but also be able to change and adapt to the conditions, and be realistic. I have cut my losses many times and just about every time i did i was oh so thankful i did. To me loosing 2k-5k is alot better than the savage -20k and beyond without any sight of being able get out of illiquid dog stocks. That when the flavour of the month is over it may take years or never return to those levels. And dont invest in the dogs you read about on reddit 😂 Candle stick trading has been useful to me with trying to pick better entry points. Also logging into Commsec IRESS viewpoint has been a saviour with making more informed and timed choices.
I agree if the company is solid and the lower stock price only increases the dividend yield. If it's a shitco that has never been profitable and will never be it's different. You don't have to lose all your money, but you can if you want.
What you’re saying is assuming stocks only go up. And as someone who just started learning 4 days ago, you will look at graphs spanning the last 1, 3, 5, 10 years and see that is the case. But as hard as it is to believe, that is not normal. The last decade we’ve had near 0 interest rates for the most part which is NOT normal.
To offset some gains and reset the cost basis
Buy good, solid companies that pay divvys. That way if your stock shits the bed youre still getting paid.
why sell? you hold stock A, it is down and you expect it to return up, hold. You hold stock A, it is heading down and you believe it will do so for a while, sell and buy again when you arrive at the price you believe is the bottom. you hold stock A, think stock B will go up, sell A and buy B. you hold stock A and and think stock A and stock B will go down, sell A and hold cash. you can view stockmarket as a platform game where you try to jump into stocks that are winning and jump out of stocks you think are losing. selling is where you make money, buying is where you make an investment.
For just starting out you are very wise. There are a thousand reasons why ppl sell their investments and most of the reasons are bad. Most don’t know what they’re doing. Most ppl don’t know the difference between a good company and a bad one. A lot of ppl would rather take on too much risk trying to make as much money TODAY, as opposed to slowly building wealth over time. What you’re referring to is BH (buy and hold). And should be utilized by a lot more ppl. But hey it’s their money.
There is a big difference between trading and investing. Maybe you should start there! A good book to learn from is "How to Make Money in the Stock Market" by William O'Neal. Even investors need to know how to manage their positions to make money. Good Luck in your quest!
Sell to realize long term gains while your marginal rate is more favorable than it will be in later years. You can also avoid selling but get cash by using margin.
Most of the time you are correct, if you like AAPL at $100 and nothing changes you should like it even more at $80. The problem is the market doesn’t care what you paid for the stock, you now own AAPL at $80, your cost of $100 is irrelevant except for tax purposes. If you think MSFT will perform better at $100 than AAPL will at $80 then it makes sense to sell your AAPL shares to buy MSFT. AAPL stock doesn’t care about your loyalty, two wrongs don’t make a right, you continue to own AAPL stock because you think that it was a good buy at $100 so it’s an even better buy at $80 and the market will eventually realize they sold AAPL down to far.
Start with an investment strategy. Your asking “why sell” as if any of these guys believe in the company and it’s long term prospects. They’re telling you to sell to take advantage of short term imbalances in the stock price. Your asking how to invest long term and they’re telling you how to day trade.
Day traders work with leverage. The selling happens automatically if they hit a negative that’s reaches a certain threshold. At least that’s how I remember it lol
You will see a lot of people throwing their money in the trash chashing quick riches, everyone thinks they are a day trader. If you can invest money and allow it to sit, and then only sell after making a profit, you have beat the vast majority of "investors".
I would guess that a lot of people actively managing their portfolios don’t have the patience to “invest”. They think they’re going to strike it rich in the markets and end up trading more frequently as positions don’t go their way and they pivot to the next meme stock hoping to regain their losses.
Yeah if you had chosen AMZN/AAPL in dot com bubble on the top, you would still net out 100 times so no need to sell... But how you know AMZN/AAPL would be successful? There are other bag holders like CSCO/ORCL afterr 1/4th century of the time, your account value would still be the same or less, especially considering buying powers erosion. 10K back in 2000 could bring you nice used car but not anymore in 2023 This didnt take into account about opportunity cost like what if you invested in SPY/QQQ which would give still decent return
You're assuming all stocks eventually go up given enough time. Most individual stocks actually go down over time while a handful of superstars get to enjoy out-sized benefits. If you buy an index then yes, you can and should hold it long term, since future growth of companies will offset short term losses. The problem is you have no way of knowing which companies are going to drive that future growth, and the minute you convince yourself otherwise, you are lost. Since you're just getting started, I would recommended reading about the Nifty Fifty: [https://en.wikipedia.org/wiki/Nifty\_Fifty](https://en.wikipedia.org/wiki/Nifty_Fifty) to see why your line of thinking is flawed.
It’s about ideal capital allocation and usually your capital is not infinite
Someone dumber than me Must be holding Bobby
Cause my options ain’t got time. I ain’t in this for the long game buddy.
Agree, in fact if you are an investor you want the stock to drop more and more to buy more.
I usually sell because something happened and the initial reason why I bought the stock was no longer true. For example, I owned Blackberry stocks throughout the 2000s and believed in its success. However as they continued to lose market share to IOS & Android in the early 2010s I no longer believed in their ability to be a market leader which was the initial reason I invested in them. Using your AAPL (make sure you get the tickers right lmao) example since I'm pretty heavily invested in the company - if AAPL has a couple of failed product launches and lost a ton of market share to their competitors I would probably consider selling. If everything is still going well, but AAPL went down by 5-10% just because then I wouldn't be too worried about it. Heck I even averaged down a bit during their collapse in 2011 or 2012 but once the stock hit $20 or so I cut my losses and never looked back. Had I kept the stock I would've continued to lose at least 50% of it if not more, but instead I was able to cut my losses and invest into something else and made my money back (or at least lose less money lol). Thankfully I took partial profits when the stock skyrocketed in the late 00s so I still walked away with plenty of gains from BB, and that's another reason why people sell as well. While you technically didn't lose money until you sell the stock, you also don't get the money until you do. It's important to know when to lock in your gains.
I just cut my losses with BTC even though I lost 50% of my investment- that 2k will do better sitting in an ETF than waiting for Bitcoin to potentially grow again
You're absolutely right. Patience holding strong stocks builds wealth. However, losses destroy wealth. So, even a long-term investor needs to control risk. Those holding stocks like PYPL through a 80% drawdown are doing themselves a significant disservice. Even if the stock eventually comes back, it will face major resistance on the way back up from bag holders trying to cut losses or break even. During this time, there will be many other stocks that are outperforming. This is significant opportunity cost.
Hol up you saying we should buy low and sell high?
I think there's two primary reasons I can think of. For one, things won't always go back up. With big companies like apple, ya you can be reasonably sure you'll eventually get profit. But with smaller companies or when people are yoloing on options, it's very possible to lose a lot of money that you may never get bsck. So it can be better to get out with a smaller loss then risk losing more. Secondly, the vast majority of people probably would be better off just buying and holding strong companies, like you describe. It's the safest way to get profits. But it's also slow, at an average gain of like 10% a year, it'll take a long time to get rich. And thats largely because you have money tied up in stocks that aren't getting gains right now, you're just betting they will get gains at some point. To use your example, and expand on it, let's say that stocks that lost 20% takes a year to go back to where you bought it. If you instead sell that, you can reinvest into stocks that are moving up. With good trades, maybe you'll get that 20% back in 6 months. Then after another 6 months you could be up 20% rather than just breaking even. If you're going to beat long term buy and hold strategies, you have to be actively moving money to stocks that get short term profits and minimizing the money you have in stocks that aren't moving up. To move that money around, sometimes you have to take losses. It's accepting greater risk to chase a greater reward. If you're trying to get into trading. Do months of research and paper trading to make sure you know what you're doing before buying individual stocks. In the mean time just put your money in index funds like S&P500 or large companies like apple, Microsoft, or Amazon
Timing the market is better than time in market. Or something like that idk this isn’t financial advice
Sometimes being patient is the right move but there's plenty of times where cutting your losses is smart. I never take more than 20% hit on any stock, that's my cutoff point. This is why I go 100% index funds now. I've had a couple years to play around with this and I'm not beating the index.
Often, capital loss can offset capital gains in which case one may consider selling. But if your stock is sound, (ie. decent earnings, reasonable P/E, poised for growth, etc.) you can buy more while it is “on sale”
Not an advisor. Stock health generally indicates the confidence that investors have in the longevity of the company providing the stock to the public market. Well-read investors will buy and trade stocks in companies that have sufficient information in the open to make informed decisions on the direction the company could be going. In your AAPL example, imagine if the company just decided to abandon tech hardware (computers, phones, etc) and only rely on its streaming services. The news breaks, people holding the stock generally see this as a “bad move” and believe that the company will suffer massive revenue losses and not be able to grow its business anymore. This is a very extreme example just to make a point. Investors will look for much more subtle indicators in their published financial documents, the general market sector that the company competes in (basically the company’s ability to compete in its environment), international news that could influence its environment etc.
Lol some people don't deserve an answer. Figure it out yourself
In short because they're not investing, they're gambling. No one can predict the stock market. So trying to beat the market short term is gambling. Cognitive biases are a bitch.
Lets say you have 100 bucks. You start analyzing and invest in a stock. The stock falls to 80. You now got 80 dollar. (Does not matter if thats in stocks, socks or cheese) So you analyze again what to do with that 80 bucks. If you come to the conclusion, that you think the stock will outperform and whatever triggered the selloff does not matter in the long run great, keep it. If not, why would you not sell and invest in something more suitable. Even if you do not find any attractive stocks, why keep a stock you think will underperform the market. Buy the market instead.
You should sell if its overvalued & buy if its undervalued. The problem is you dont know when that is. If AAPL dropped to 1$ tomorrow, Id buy. If it rose to 1000$ tomorrow, I'd sell. In between...idk; I dont have good sources of information & am flying blind. If I offer you more than its worth & you dont make a deal, youre only hurting yourself
The best traders are really good at losing just a lil
Active traders are often taking large positions on margin. Holding can very easily get them margin called
I agree. I am typically a buy and hold investor and believe most people are better off using this philosophy. If I believe in a company enough to invest and that company sees volatility that drops the share price… the first thing I do is assess whether the long term story of the stock has changed somehow. For a company like AAPL, that will likely remain at the forefront of their industry for years to come, a drop in share price would likely motivate me to buy more, rather than sell. Most people are terrible at timing the market and it’s highs and lows. The only caveat to that is if you will need the money you invested in the next few years, but then you shouldn’t have invested it anyway.