If you purchase a stock because it has certain fundamental characteristics, it makes sense to sell it once it no longer exhibits those same qualities. This may be because of a deterioration in fundamentals—declining growth rates, a reduction in dividend, etc.—or because of changes in valuation. The A+ Investor Stock Grades gives you an easy way to keep tabs on fundamentals and valuations for stocks you own.
Deteriorating fundamentals can contribute to a decline in stock price, but not always. For almost all investors, there will come a time when you need to decide whether it’s time to move on from a stock with a large loss. In many cases, it’s best to find a new stock with (hopefully) better prospects.
A+ Investor has created five quantitative Stock Grades that give you a quick snapshot of a company’s fundamentals based on five investment factors:
The Grades tab of My Portfolio shows A–F grades for all of your holdings on the five factors.
Clicking on a ticker opens the Stock Evaluator page, where you can select the Grades tab for more in-depth information on each of the company’s grades. On this page, you can compare you stock to its competitors and get details about the underlying metrics driving the grade summary.
Armed with this information, you can start developing a picture of a stock’s current prospects, which should aid in the decision whether to hold or sell your stock.
Selling a stock is an important investment decision, so it is crucial to have the proper information to avoid making an emotional decision. Evaluating your stock holdings to see how they fit within your allocation strategy (sector, size, etc.) as well as how they rate on their fundamental characteristics will help you make an informed sell (or hold) decision.
In the end, we shouldn’t be paralyzed when it comes to deciding whether to sell a stock. By the same token, it is a good idea to have a clearly defined framework to use to aid in the sell decision-making process. There are some very good reasons to sell stocks, just be sure that you’re selling for the right reasons and not merely based on emotion.
