to join Testbook.com

 https://testbook.com/invite/NP1PTK

How to decide when to book profit on the stocks you hold

1.         Buying a stock at the right time is easier than figuring out when to sell it. Emotion plays a key role in profit-taking decisions. It is hard to separate emotions from trades and the two emotions – namely greed and fear – actually rule the investor’s mind. Managing these emotions is key to becoming a successful investor.

2. In this article, we will discuss about key triggers that can help decide when to book profit in a stock. A profit-taking strategy is essentially about deciding when exactly to sell an asset to realise the profit.

3. The idea should be to make the process as methodical as possible in order to be able to remove any emotion from the decision. Some of these methods include valuation-level selling, opportunity-cost selling, deteriorating-fundamentals selling and the down-from-cost and up-from-cost selling.

4. In the valuation-level selling strategy, an investor sells a stock once it hits a certain valuation target or range, which he would have set before investing. There are numerous valuation metrics that an investor applies to set such a target. Some of the common ones are the price-to-earnings ratio, price-to-book ratio and price-to-sales ratio. This approach is popular among value investors, who buy stocks when they are undervalued and sells when they are overvalued.

these all points are from the economic times of india news.........