Who decides the share price
Selling shares - the when and how decides
Although stocks are primarily suitable as long-term investments, there are situations in which it is better to part with some stocks from the portfolio as an investor. Not only tactical considerations play a role. If, for example, everything indicates that a company is on the decline, it spoils the performance in the portfolio. If switching through the sale of stocks is the order of the day, it may seem straightforward at first glance, but when it comes to when and how an investor should sell stocks, there are a few aspects to consider.
The optimum point in time is almost always missed
In addition to the how, the when is important when selling stocks: the right timing. Since no one can predict when a stock will peak, of course, the best time to come is by chance. Certain losses are always to be expected. The only question is whether it is better to risk initial losses or missed maximum profits. As a rule, it is better to get off earlier and forego the last bit of gain. Losses, however, have a greater impact. Especially when a downtrend quickly develops its momentum, while one hesitates in the hope of a recovery in the price of the securities.
Last but not least, investors with shares from RWE or Eon in their depot know what it means to land in the deep valley of the price slump for a long time. After the decision to phase out nuclear power, the energy supplier's papers took years of patience and hope from the shareholders. Once the price has fallen drastically, the issue of selling stocks is over for the time being.
Therefore, it is best to keep a cool head when it comes to securities - the worst advisors are greed or fear that arises. In the first case opportunities are overwhelmed, in the second case stocks are not sold for far too long. Since the ideal time is difficult to define even with chart analyzes and indicators, you set clear goals and limits in advance instead of making a spontaneous decision. Both the price targets and the loss limits depend entirely on the respective share.
Limits against fear and greed
In the case of solid, established corporations in the Dax, less strong price jumps are normally to be expected in the securities than in emerging companies that still have their future ahead of them. Accordingly, course targets between 10% and 30% are appropriate, for example. In the case of more sluggish stocks, the limits are quickly reached with smaller values before they are bought too expensive and turn into the red. Conversely, the same applies to loss limits for stocks. Anyone who is willing to forego a few percent upwards or profits and limit losses in the depot downwards sleeps more peacefully.
This protection mechanism can be set up very easily via an order supplement. This means that shares are automatically sold according to defined criteria and limits. The fearful staring at the course of the course is largely eliminated. You are not fooled by your own greed or fear and remain in the self-imposed protection zone both in the case of exaggerated market euphoria and panic selling.
At this point, the when is the same as the question of how to sell stocks. The mentioned order additions can be divided into three groups when selling shares.
Sell limit order
With this addition, a minimum price is set at which sales are made. When a certain price mark is reached or exceeded, the order for the securities is executed immediately, but not if the share price is below the limit. The aim is to secure courses that are as advantageous as possible.
Here, a sale is carried out at the trading venue as soon as the share price develops negatively. As an investor, you want to secure profits with it and place a stop below the current market price. If the price runs into the critical area, the share is sold immediately. As mentioned at the beginning, this can also be used, for example, with rising prices. It is automatically sold when the price reaches a critical threshold where it threatens to tip over.
There is no limit to the market order. The share should be sold as soon as possible. The possible additions “cheapest” or “best” only mean that the sale at the trading venue will be implemented immediately, even if losses are incurred. This can happen, for example, if the course deviates from personal expectations due to jumps in the meantime.
Costs and taxes
These order additions are given to the person who trades the shares - usually a bank or broker. Since personal or telephone orders are becoming rarer, it is mostly online today. A sale is carried out on the secondary market, i.e. an exchange or a trading venue such as the Stuttgart Stock Exchange, the Frankfurt Stock Exchange or Tradegate, which specializes in private investors. More exotic stocks or cheap penny stocks are sold over the counter.
The exchanges of course earn money from trading and have different pricing models. The broker or bank also requires a fee or a fee for every transaction, i.e. for buying and also for every sale. A comparison of the providers for a fee in advance is therefore urgently required.
Finally, the tax office is also involved. The sale of shares falls under the investment income area and is therefore subject to the withholding tax. The flat rate of 25% is usually deducted and passed on directly by the bank. Not so if the provider is located abroad. In that case, you have to pay tax yourself on the amounts that exceed the annual tax allowance of 801 euros for single people and double that for married people.
Sell and reinvest with limited loss
Overall, it is by no means easy to correctly interpret signals that indicate when and how best to sell stocks on the trading venue. In this way, stocks in well-positioned companies can be carried away by the negative stock market sentiment that is affecting an entire industry. Even a company's business data is no guarantee of predictions. However, it is possible to use the price-sales ratio to assess whether a share is too expensive compared to the industry. If the value is comparatively very high, the consideration is to sell the share sooner.
A sale can also be considered if the price is significantly below the cost price for a long time. The widespread hope of speedy recovery is often enough disappointed. In no case should one brace against a clear downward trend. It is better to sell with a limited loss and invest the capital in more promising stocks than to hope for future profits.
10 years after the nuclear phase-out: energy companies are compensated > read more
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