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Recognize when to sell and when to hold from "summary" of One Up On Wall Street by Peter Lynch,John Rothchild
Knowing when to sell and when to hold is a crucial skill for investors. It's easy to get caught up in the excitement of a rising stock and hold on for too long, only to see profits evaporate when the market turns. On the other hand, selling too soon can mean missing out on potential gains. The key is to strike a balance between holding on for long-term growth and selling to lock in profits when the time is right. One way to determine when to sell is by evaluating the reason you bought the stock in the first place. If the original thesis no longer holds true, it may be time to reassess your position. For example, if a company's fundamentals have deteriorated or the industry outlook has changed, it could be a sign to sell. Similarly, if a stock has reached what you consider to be fair value based on your analysis, it may be time to take profits. Another factor to consider is the stock's valuation relative to its peers and historical averages. If a stock becomes significantly overvalued compared to its industry or historical norms, it may be prudent to sell. Conversely, if a stock is undervalued or trading at a discount to its peers, it may be worth holding onto for further appreciation. Market conditions and macroeconomic factors can also play a role in determining when to sell. If the overall market is experiencing a downturn or there are signs of a looming recession, it may be wise to sell your more volatile holdings to protect your capital. Similarly, if a company is heavily exposed to geopolitical risks or regulatory changes, it may be a good time to sell before those risks materialize. In the end, the decision of when to sell and when to hold comes down to a combination of careful analysis, market conditions, and your own risk tolerance. By staying informed, regularly reassessing your holdings, and being disciplined in your approach, you can increase your chances of making successful investment decisions.
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