A Beginners Guide to Investing: When to sell or when to hold?

“Should I sell or should I hold?” These two are the most sought questions in the investing world. When you see a stock rose 40% since you invested in it, should you take profits? Or should you wait for another bull run?

There’s a saying: “Bulls make money, bears make money, pigs get slaughtered”. This just means that whatever the market is, anyone can make money. Those who lose money are those who are greedy to make more or don’t have an exit strategy. There would come a time that you have to sell and realize your gains. The question still stands: When? While we don’t have a crystal ball on what will happen tomorrow, we can give you some indicators on when to sell or hold. This could guide you in discerning whether to sell or hold your investments.

What is selling and holding?

By definition hold is an analyst’s recommendation to neither buy nor sell a security. A company with a hold recommendation generally is expected to perform with the market or at the same pace as comparable companies.

For us to understand this more, it just simply means that when you as an investor hold onto an investment,  you are effectively initiating a long position in an equity. Investors who hold an investment for a long period of time can benefit from quarterly dividends and potential price appreciation over time.

Whereas to sell, this generally refers to an analyst’s recommendation to close out a long position in an investment because of the risk of a price decline.

Selling is as important as holding, in other words, as you sell as an investor you can protect some of your investment from the risk of losing its value.

Things to consider when selling or holding on to your investments

A. Performance

One of the reasons that you should take note of as an investor is the performance of your investment, whether it is going on an uptrend or downtrend. Knowing your performance on a daily basis basically tells you if you can reach your financial goals in time.

B. Adjustment of Portfolio

If you are an active investor, you might want to consider selling your purchased stocks if and only if your financial goals do not match the results of your investment. Statistically speaking, the more you hold onto your purchased stocks the more you’ll gain from it, but the downside is that the market is volatile, meaning it changes from time to time.

C. Freeing up your Capital

Another reason to sell your investments is to sell and use the capital that you’ve gained from your past investments. The reason for this is that you realize losses to offset your gains. We have a choice to hold on to our investments but when the time comes that we’ll be needing that money, it is good to consider selling your investments to finally free up your capital and for us to try investing in a new stock as well.

What kind of investment and platform to invest in?

Now that you have finally understood the basics of holding and selling on investment, now is the time for you to decide what investment you should get into. We’ve listed down some investments that you should try if you are new or experienced in investing.

Corporate Bonds

Corporate bonds are debt obligations (or IOUs) issued by companies to the general public and institutional investors to raise more capital. In terms of earnings for you as an investor, you will be entitled to a steady stream of coupon payments because the interest rates are fixed. The bond is then repaid in full at maturity date.

LTNCD

An LTNCD, or Long-Term Negotiable Certificate of Deposit, is a bank product offered to investors looking for a relatively safe investment, but with higher interest rates than a regular savings account or short-term time deposit. As mandated by the BSP, LTNCDs are to be denominated in Philippines Pesos, have a minimum maturity of 5 years, be scripless in form, and registered with a third party Registry Bank maintaining an Electronic Registry Book.

Stocks

A stock is a share in the ownership of a company. So when you buy a share of stock, you are also buying a piece of a company. Once you invest in a stock, you will be a shareholder who is entitled to a portion of the company’s profits. The stock market, on the other hand, is a place where traders buy and sell shares. The Philippine Stock Exchange (PSE) is the corporation that facilitates local stock markets and is the local counterpart of America’s Wall Street.

Cryptocurrency

A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Cryptocurrencies are systems that allow for secure payments online which are denominated in terms of virtual “tokens,” which are represented by ledger entries internal to the system. “Crypto” refers to the various encryption algorithms and cryptographic techniques that safeguard these entries, such as elliptical curve encryption, public-private key pairs, and hashing functions.

Learn more about Cryptocurrency

UITF

UITF stands for Unit Investment Trust Fund. It’s an investment fund managed by experts to maximize the chances of getting high returns. It usually entails minimum investment and trust fees per year, depending on the bank and fund type. This kind of investment is most suitable for beginners who have little to no trading experience. With this type of pooled fund, your money will earn more than a basic bank account, can be withdrawn anytime (it’s liquid), and will be put in the hands of seasoned financial experts. You can also choose funds depending on the amount of risk you want to take in–from conservative, moderate to aggressive.

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