Issue #4: How to Know Exactly When to Buy or Sell Stocks
Learn when to sell and buy stocks, why falling in love with your investments is a rookie mistake, and why that 'must-have' purchase of yours can wait.
Reading time: 4 minutes
Charts 2-Pack
Top Companies and Cryptocurrencies Constantly Change
Never fall in love with your investment. It has one job and one job only—to make you money.
That might sound a bit harsh, but it's the reality. The moment you get attached, you start losing. Why? Because emotions cloud your judgment, and you'll end up overlooking the red flags.
Companies rise and fall, market leaders come and go. The company dominating today can get knocked off its perch tomorrow.
Just look at how Nokia and Blackberry crumbled when Apple entered the mobile phone industry. The business world moves fast, and no one stays on top forever.
Crypto moves even faster and crashes harder. Just look at the top 10 in 2013 compared to 2024—most of those cryptocurrencies are dead now.
The key is to stay objective and remember that your investment is a tool for profit, not a love affair.
Climbing Out of a Hole Takes More Than Falling In
Do you think a "small" loss is easy to recover just by getting back the same amount? Think again. Each loss requires the asset to gain even more to break even.
And heaven help you if you've lost 50%—your investment now needs to double just to get back to square one. Down 90%? It has to 10x!
So, keep this in your mind forever.
Let inflation nibble at your cash—better that than burning it on the latest hype around some random stock or meme coin you didn't even bother to research.
Knowledge 2-Pack
At some point, you'll face the tough choice of whether to hold an asset or sell it. It's a situation that no one can escape.
Sometimes, the temptation to hold on just a bit longer feels overwhelming, even when selling is the right move. Other times, the urge to sell too quickly leads to regret when the asset continues to rise.
So how do you decide?
When to Sell Stocks?
3+ consecutive quarters of declining earnings.
2+ consecutive years of declining market share.
Persistent management problems without signs of improvement.
The P/E ratio is significantly above the company's historical average, industry peers, or the overall industry's long-term average.
2+ unrelated acquisitions that strain resources.
Rapid debt accumulation relative to earnings, especially to fund operations rather than growth or during economic downturns, combined with lowering cash reserves.
Large inventory build-up and the struggle to clear it out.
When to Buy Stocks?
Logically, if the opposite of these signals holds true, it's a sign to keep holding or even consider buying more.
If the reasons that made you invest in the first place still stand strong, and the story hasn't changed, then why sell?
This is the most important thing to remember. The news turns bearish, Wall Street's dumping the stock, and your friends and the online groups you follow are convinced it's heading south.
But when you dig into the fundamentals again that made you buy the stock in the first place, you realize nothing has changed.
That's why you should always ask yourself: if the story hasn't changed, then why sell?
Life Hacks 2-Pack
Wait 7 Days for Big Purchases
If you're about to make a big purchase, follow the one-week rule: wait seven days before pulling the trigger.
During that time, ask yourself, "Is this something I really need, or just something I want?"
The delay works like a reality check. It calms your emotions and lets rational thought take over.
Most of the time, you'll find the impulse fades, and what seemed essential yesterday suddenly feels unnecessary. On the rare occasion that the urge remains, it's probably a purchase that could genuinely add value to your life.
How to Safely Transfer Crypto: Test First
Before making a large cryptocurrency transfer, you should always send a tiny test amount first.
Crypto transactions are irreversible. Once funds leave your wallet, there’s no one to call for help if something goes wrong.
Even if you’ve checked the address ten times over, adding this extra step helps ensure peace of mind.
A small test transfer confirms that the address is valid, the network is working properly, and the funds will end up where they’re supposed to.
You can never be too cautious.
Thank you so much for diving into this week's insights! Hope you found them valuable.
See you next Thursday!
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