When a Better Opportunity is Identified

If you have made the right decisions while buying your stocks, this reason for selling stocks does not arise often. But in case you were to find a better opportunity in another stock than you find in any of your holdings, and you don’t have additional funds to deploy, it is a good idea to sell some of your existing stocks to reinvest in that better opportunity.

The stocks that you might decide to sell might still be good. But then the newly identified stock might be even better.

It’s like selling a stock where you expect annual average returns of 15 percent (which is good in absolute terms) to buy a stock where expected returns are around 20 percent.

But when you are looking to switch to a better company, return must be just one of your criteria. The new company must also pass your criteria of ‘great business at a bargain price’.