In case of short term investments that are held for trading, it is highly important for an investor to know whether he should sell his investments, hold them, or whether he should acquire new investments. This decision may not be easy to make and there is always some risk involved, but there are certain factors that can help an investor make this decision. The historic market performance of the company is the biggest indicator of the prospective performance. Therefore, the trend in the market performance of the company can help an investor make this decision.
Following are the factors that indicate when to buy, sell, or hold the investments:
When to Buy
Shares can be bought when the company shows very promising financial performance in the future periods. Mostly, when the share price of a company is low and the company releases exceptionally promising financial results, this may set the share price on an upward track which may go on for a substantial period of time. Therefore, this may also be an opportunity for the investors to buy the shares in the company. Recent examples may be the stock of Qualcomm. The stock of the company was undermined due to the lack of the company’s ability to meet its demand. However, as soon as the company announced favorable financial results along with the disclosure that the supply chain issues have been dealt with, the stocks of the company were revived. This gave the investors an opportunity to buy the stock to earn high returns in a short term.
When to Sell
Shares can be sold when the company exhibits a continuously declining market performance. This can be done in order to prevent risk as further downslide in the value of stocks can widen the extent of loss. Therefore, most investors tend to sell the stocks when there is concrete information that the shares of a company will lose their value for a long period of time. However, selling the stocks may not be a rational decision if the decline in the value of shares is temporary. If there is sufficient indication that the stocks will recover their value in a short period of time, it may be wise to hold the stocks.
When to Hold
Shares should be held when the market performance of a company is stable and the prospects are good. For example; if the stocks of a company do not perform impressively in the market but there is concrete information regarding the revival of the stocks in the near future, it may be a rational decision to hold the stocks of the company to benefit from the prospective rise in value. The example in this case may be the shares of US mobile carrier Sprint. The stock of the company has not shown any impressive performance in the recent past but the latest financial information released by the company indicates profitable rise in value in the future. Therefore, it may be recommended to investors to hold the stocks in such companies.
It can be concluded that the success of an investor depends upon the feasibility and the timing of his decision buy, sell, or hold the shares. If these decisions are made in the right manner, an investor can earn very high benefits from the rise and fall of the share prices.