Setting Investment Selling Rules: A Guide to Protecting Your Portfolio

Coming up with investment selling rules can help you determine the best time to liquidate your investments. Here are a few things to consider about setting some investment selling rules for yourself.

Price Drop

One of the most common reasons that people will decide to sell is if the price of a stock drops. You need to have a specific percentage that you are working with when it comes to selling after a price decrease. For example, if the stock drops 10 percent in value, you will sell.

Industry Downturn

If the entire industry is in a downturn, you may decide to sell your investments as well. Keep in mind that many investors find buying opportunities when stocks are down, be sure it is something you do not think will rise again.

Company Factors

When you are deciding whether to sell your investments, you will also want to take a hard look at the company itself. For example, if the companies profitability seems to be decreasing, you may think about selling. If the company's dividend increases are behind the rest of the market, this could be a good indication of decreased profitability. Another good indication that you should sell is if company insiders or employees of the company are selling their stock in the public marketplace. Many times, these indicators can be used to determine a good time to sell.