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Secrets of Successful Wealth Management: 9 steps to the life you've always wanted, before and after retirement.

Topic: Wealth Management

In deciding when to buy and sell stocks, beginners should take into account these key factors

when to buy and sell stocks for beginners

Knowing when to buy and sell stocks for beginners means investing for maximum gains but at the same time avoiding selling your best stocks too soon

Deciding when to sell is the trickiest part of investing— and that includes deciding when to buy and sell stocks for beginners in the market.

Our genes program us to run from danger, and every day the media brings new reasons to sell. But if you sell too often or too quickly, you’ll sell a lot of your best choices way too early, and you’ll never make any serious profits. 

You can find numerous rules of thumb that aim to tell you when to sell. Most are based on chart-reading or technical analysis. All work at times, but none work consistently. When they fail, the profits you miss out on are likely to overwhelm any risk they help you avoid. 

Our rule is that you can cut way down on times when you really need to sell by consistently buying well-established, high-quality stocks. Those picks can still drop sharply when the economy falters or bad news strikes, of course. But these are the stocks that snap back most quickly and most reliably when the trend reverses and bad news comes less often. That’s why it generally pays to hold on to stocks like these through market setbacks. But you need to look at each case on its own, since there are exceptions.

Invest in your Financial Future for FREE

Learn everything you need to know in '9 Secrets of Successful Wealth Management' for FREE from The Successful Investor.

Secrets of Successful Wealth Management: 9 steps to the life you've always wanted, before and after retirement.

Deciding when to buy and sell stocks for beginners includes considering why you made an investment in the first place

Suppose you bought a stock because you liked its earnings and dividend history, and you thought it had a lot of growth potential. These are markers of a high-quality stock. But if a stock like that drops after you buy, you need to resist the urge to sell. Instead, update your view.

Did the stock go down because of temporary bad news, such as a single quarter of weak earnings? Or did it drop due to seemingly bad political or economic news in one of the markets it serves? If so, was it a major or minor market for the company?

Or, did it drop because of something more serious that could endanger the dividend and undermine its long-term potential?

Taking all of these factors into account will let you make a much more informed investor decision.

Avoid frequent online trading in learning when to buy and sell stocks for beginners

While online trading seems like an easy and convenient way to invest, it can also be an easy way to lose money. There are many hidden dangers that may not be easy to spot at first.

The main risks of online trading come from the fact that it all may seem deceptively easy. The lower costs and higher speeds of online trading can lead otherwise conservative investors to trade too frequently. As a result, you could wind up selling your best picks when they are just getting started.

Learning when to buy and sell stocks for beginners requires going beyond charts and considering random elements for making the best choices

There’s a large random element in the stock market, as in human activity generally. If you react to stock-price changes impulsively or emotionally, you multiply the effect of that random factor.

It’s a mistake to buy or sell stocks just because they have gone up or down. That’s because of the large unpredictable element in stock-price direction. Investing in a random fashion almost inevitably costs you money in the long term.

People guess right on various topics every day. Random events like winning guesses tend to occur in bunches. However, nobody can predict the future with any consistency.

More tips for beginners:

  • Conflicts of interest have a big impact on what people believe, recommend, say and do. This is especially true if there’s money involved.
  • History never quite repeats itself in the stock market, but often seems like it’s about to do so.
  • A rising market climbs a “wall of worry.” Each brick in that wall—each new investor worry that comes along—could lead to a massive market decline if it continued for an unusually long period, and/or continually gains strength, rather than tapering off as most market worries do. That’s why you need to resist the urge to get out of the market during temporary downturns.
  • You need to be aware that at crucial times, the stock market acts as if it is going to do whatever is necessary to fool the largest number of people who hold strong opinions.

To succeed as an investor, you need to consistently follow investment practices that have paid off for large numbers of investors over long periods. If you take big risks—bet on long shots—you are likely to lose.

To make money in the market, you should only invest in stocks when you can afford to and intend to hang on to them for a lengthy period, perhaps two to five years. Your plans may change due to circumstances you can’t control, of course. But if you go into the market without committing to a lengthy stay, you are at risk of selling impulsively during the next short-term market downturn. Do that and you are likely to lose money.

Stick with our three-part Successful Investor philosophy and deciding when to buy and sell stocks for beginners or experienced investors will be much easier

Top-quality stocks tend to lose less of their value in the kind of severe market setback we’ve experienced. For the best long-term results, Pat McKeough still thinks you should stick with his three-part program:

  1. Hold mostly high-quality, dividend-paying stocks.
  2. Spread your money out across most if not all of the five main economic sectors: Manufacturing & Industry, Resources & Commodities, Consumer, Finance and Utilities.
  3. Downplay or stay out of stocks in the broker/media limelight.

Does online trading provide an advantage or disadvantage to beginner investors?


    • TSI Editorial Team 

      Thanks for reaching out! Our focus on high-quality, dividend payers has shaped our portfolio of buys for both conservative and aggressive investors. Often, the decision to abandon the buy-and-hold strategy seems to crop up when the market is down or at least in a state of turmoil that leaves investors uncertain. Our “buy and watch closely” approach has done well for our portfolio management clients over the past few decades. We recommend this approach for our readers as well. We start by applying our three-part Successful Investor approach for portfolio construction. Note that this doesn’t mean we suggest you never sell. Indeed, if fundamental changes in the outlook of a quality stock occur, we have no problem changing our buy or hold recommendation to sell.

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