When Should You Pull Money Out of a Stock?


Quick Answer

You should pull money out of a stock when the issuing company has lackluster earnings or revenue, says Bloomberg Business. Keeping this in mind, investors should gauge all stocks dispassionately and without emotional attachment.

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Even short-term improvements can't compensate for lackluster earnings, advises Bloomberg Business. Return on capital is another good measure of a company's prospects. Wall Street researcher Ivan Feinseth measures return on capital by taking the company's net, post-taxes operating profit and dividing by capital.

Adopting a contrarian attitude can help when it comes to timing stock sales. The average Wall Street analyst acts in a herd-like manner, upgrading stocks in the wake of positive news and only downgrading them after share prices have already collapsed. On the other hand, bond analysts are more likely to provide early, useful insights into which stocks deserve abandonment, according to Bloomberg Business.

When buying stock, it is wise to have a set price target, says Investopedia. This number or range gives investors a concrete deadline for selling in a timely, profitable manner. By carefully reading a company's financial statements, it is possible to identify fraud before the company's share price collapses. Selling immediately after a merger is often wise, as mergers are often unsuccessful.

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