Logo of Phnom Penh Post newspaper Phnom Penh Post - When is the right time to sell stocks?

When is the right time to sell stocks?

Content image - Phnom Penh Post
A high risk, high return strategy is best suited for investors with active participation in the stock market. SUPPLIED

When is the right time to sell stocks?

While acquiring stocks is relatively easy, understanding when best to hold or sell them can prove more challenging.

Prior to purchasing or selling an investment, investors should outline a personal investment plan detailing their short and long-term investment objectives.

Because there is not a single universal method for selling stocks, investors may have to do extensive research or get in touch with a financial advisor for assistance to develop a plan fitting their financial objectives.

When drafting an investment plan, investors must take into consideration their personal tolerance towards potential losses and a time horizon in which they expect a return.

Developing a personal plan

With regards to tolerance, some investors will forgo the chance for larger returns in order to keep the risk as low as possible.

Some may prefer an opposite approach and are prepared to take risks.

A high risk, high return strategy is best suited for investors with active participation in the stock market and those with high expectations of gains within a short period.

By understanding their personal tolerance, investors can plan for when to buy, sell and hold their assets, as well as for what kinds of equity to purchase and to know the required capital to allocate for their investments.

It is also important for investors to determine when they can expect a return on their investment.

If an investor has a long-term time horizon, they can likely ride out short-term price fluctuations.

However, if the investor requires a return or withdrawal within a shorter term, meaning one or two years, investors will likely have to think of a different strategy for holding or selling their investment.

Additionally, each investor can have different objectives towards their investment.

Outside of factors such as age, financial situation and social context, other developments can vastly influence an investor’s view and financial choices.

For instance, a young adult is more likely to hold their investments or zigzag between different stocks for years before withdrawing their capital for other uses.

Conversely, an investor approaching retirement will likely have a shorter time horizon.

There exists a popular long-term passive strategy is called a “buy-and-hold strategy”, in which an investor buys and holds stocks over a long period of time.

Buy-and-hold investors typically invest in stocks based on a company’s long-term financial fundamentals, such as revenue, potential profit, strength of management team and consistent track record, while putting little emphasis on short-term price fluctuations.

Reasoning for selling stocks

When setting their personal goalposts, investors will come to consider when to sell their stocks.

The rationale may include adjustments to the investor’s portfolio, the freeing up of capital, when a price target is reached, opportunity costs, technical signals, selloffs and changes to fundamentals.

Portfolio adjustments

Due to price changes, life events or even the accidental concentration of capital into one sector, investor portfolios can become unbalanced and deviate from investment goals.

Content image - Phnom Penh Post
It is important for investors to determine when they can expect a return on their investment. SUPPLIED

The most common reason for selling stocks is to make such adjustments.

There are many reasons why a portfolio might become unbalanced or inappropriate for investment goals.

Experts strongly recommend investors to diversify their portfolio to reduce risks and losses and balance income – as such, adjustments are unavoidable nevertheless.

Freeing up capital

There comes a time when investors need the money they have invested for personal uses – ranging from starting a business to perhaps just everyday living. In such situations, investments may be sold to free up money or capital.

Price target reached

Selling at a target price is a common strategy among investors.

Some prefer to steadily sell their position as the price reaches their target, while others prefer to sell all-out at one price point.

Opportunity cost

Opportunity cost is the potential benefits lost when choosing one alternative over another.

In the case of stock investment, if it is judged that alternative options might generate a larger return, investors may decide to sell their stock and bail out.

Technical signals and selloffs

Skilled investors familiar with technical analysis and charting analyse stocks price patterns and movements through various indicators and establish a predetermined sell signal.

Should they believe that a pattern will lead to a prolonged downtrend, they might unwind the position.

Sometimes, stocks may keep on declining indefinitely with no signs of returning, with investors having to get rid of that portion of their investment to prevent further losses.

Change in fundamentals

Changes in a company’s fundamentals can include a change in leadership or staff, or a decline in quarterly/annual income.

Investors holding a stock for many years often monitor the company’s financial statements, revenues and overall performance.

If the company’s performance is not turning out as good as the investor had expected, they may consider selling before the financial situation gets worse.

Understanding and monitoring the fundamentals of invested stock is crucial to making an earning.

Buying and selling stocks is similar in that investors must make sure their current investments align with their financial objectives.

Investors must understand their risk tolerance, time horizons and reasons to sell stocks. Investors are encouraged to carry out research or contact a professional to help them stick to their objectives and make informed investment decisions.

Prepared by: Cambodia Securities Exchange (CSX), Market Operations Department.

Email: [email protected].
Tel: 023 95 88 88 / 023 95 88 85.

MOST VIEWED

  • Cambodia maintains 'Kun Khmer' stance despite Thailand’s boycott threat

    Cambodia has taken the position that it will use the term "Kun Khmer" to refer to the sport of kickboxing at the upcoming Southeast Asian (SEA) Games, and has removed the term Muay from all references to the sport. Despite strong reactions from the Thai

  • Chinese group tours return to Cambodia starting Feb 6

    Cambodia is among 20 countries selected by Beijing for a pilot programme allowing travel agencies to provide international group tours as well as flight and hotel packages to Chinese citizens, following a three-year ban. As the days tick down until the programme kicks off on February 6,

  • Capital-Poipet express rail project making headway

    The preliminary results of a feasibility study to upgrade the Phnom Penh-Poipet railway into Cambodia’s first express railway indicate that the project would cost more than $4 billion and would take around four years to complete. The study was carried out by China Road and

  • Thai boxers to join SEA Games’ Kun Khmer event

    The Cambodian SEA Games Organising Committee (CAMSOC) – together with the Kun Khmer International Federation (KKIF) and Khmer Boxing Federation – have achieved a “great success” by including Kun Khmer in the upcoming biennial multi-sports event on its home soil for the first time, said a senior

  • Bullets to bracelets: Siem Reap man makes waste from war wearable

    Jewellery is often made from valuable gemstones like emeralds or diamonds and precious metals like gold or silver, or valueless things like animal horns. But a man in Siem Reap has approached the manufacture of delicate pieces from a different angle. His unique form of

  • 61% of 2022 imports came from just 3 markets

    The three largest exporters to Cambodia – mainland China, Vietnam and Thailand – accounted for 60.94 per cent of the Kingdom’s total merchandise imports last year, at $18.245 billion, which was up 11.99 per cent over 2021, according to the General Department of Customs and Excise. Cambodia’s total imports