Here are guidelines to consider when selling a stock 1:
- The stock is significantly overpriced relative to its original cost
- You have a better investment for your money
- You need the money within 3-5 years
- The reason you bought the stock is no longer valid, you’ve lost confidence in the company, or you no longer understand the company
Selling a stock above its purchase price is essential to earning a capital gain. Remember that there is a capital gains tax to pay on the proceeds from the sale of the stock unless the stock is held in a tax-deferred brokerage account 1.
I use a simple calculation to guide the sale of my stock above purchase price. Here’s a link to that calculation.
Reference
1. Identifying sell signals for a stock. The Motley Fool. David and Tom Gardner. The Columbus Dispatch, page D4, Sunday, July 22, 2012.
