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Takeover news. When one of your stock holding is getting bought by other companies, it may be time to sell. Sure, you might like the acquiring company but you still need to figure out the fair value of the common stock of the acquiring company. I probably wouldn't.

Other Investment Opportunity. Let's say you bought stock A and it has risen to 10% below its fair value.

During your investing career, you will do these two transactions; hire purchase and selling. sale requires knowing the fair value of a stock and then smack of it with recent price. If recent stock price is 10% since fair value and an investor does not mind getting a 10% return, then he should buy the stock. If not, he can then move on to other stocks.

Selling, however is not that simple. Sometimes, investment do not go the way you want it to be. Your prediction may not be accurate. Furthermore, your time frame may be longer than you expected. Here are ten different reasons investors might sell a prosaic stock:

Need the money. This generally happens due to improper planning. However, things happen. Even the most gingerly planned strategy may not work. ravaging events such as Hurricane Katrina or Rita may force investors to sell an investment if his household is feigned by it.

The book is unclean. When management left their post cavalierly or when the Securities of Exchange convocation (SEC) conduct a criminal investigation on a company, it may be time to sell. Your first principles may be inaccurate as a lot of fair value casting is based on the company's practical wisdom sheet, cash flow or other financial statement published by management.

Takeover news. When one of your stock holding is getting by other companies, it may be time to sell. Sure, you might like the acquisitive cartel but you still need to figure out the fair value of the non-competitive stock of the purchase company. If the purchase ruck is overvalued, then it is best to sell. A good example would be the purchase of Time Warner by American Online (AOL) in 2000. At the time, AOL share price was way overvalued with Price Earning ratio of 100.

Taking Profits Off the Table. Your stock has risen 40% from your purchase price. Your fair value system indicates that the stock can rise 10% more. Should you sell? Sure. in keeping with all, the goal of every investor is to make money. If you feel that you need to get something off the table, then by all means do it. I am not going to be naive and preoccupy that you should wait for the stock price to rise 10% more. Remember that stock price goes up and down and that fair value count has some degree of uncertainty. Would you risk your 40% gain for an subsidiary 10% return? I probably wouldn't.

Other Investment Opportunity. Let's say you stock A and it has risen to 10% underneath its fair value. Meanwhile, you had watched stock B fallen to under 50% of your purposeful fair value. This is an easy decision. Go Ahead! Sell your stock A and buy stock B. Our goal as an investor is to maximize our investment return. Sacrificing a 10% of return in order to earn a 50% return is a sensible way to do that.

Inaccurate Fair Value Calculation. Let's face it. People make mistakes. As investors, we sometimes made errors in our fair value calculation. There are factors that we might not take into body count when researching a particular company. For example, Merck & Co Inc. will have a higher fair value if we dismiss the potential Vioxx liability that some say to be as high as $ 50 Billion. But doing further research, we know that Vioxx liability does exist.

New Competitors with straighten out Products. When new competitors sprung up, the troupe that you hold might have to spend more money in order to fend off competition. Recent example include the emergence of pay-per sizzling publication by Google. If you are in the publication fealty such as newspapers or network, this new product by Google might hurt your profit margins and eventually the fair value of the stock.

Exodus of Talented Employees. Talent is an asset. Yet, it does not emotionalize on the company's note sheet. Companies that rely heavily on intellectual products need to keep their employees happy. They are prized assets. When employees defect, it will chorus the company's future earnings. Lower future earnings means lower fair value for the pop stock. A recent example include several Microsoft key employees defecting to Google.

Not having a valid reason to Buy. When you don't know why you a particular stock, you won't know how much your potential return is or when you should sell it. This is the easiest way of losing money. When you have no valid reason to buy, you should sell immediately.

Stock Reaches Fair Value. This is the easiest part of the problem. Yes. We should sell when a stock reaches its fair value. It is the main reason why we chose to buy it on the first place.

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