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When's the Right Time to Sell a Stock? (Part 2)

Investors should compare share price to intrinsic value and also consider their alternatives before making a move, says StockInvestor editor Matt Coffina.

Morningstar Editors 04.02.2015
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One of the biggest questions stock investors have is when to sell. To shed some light on the subject, we sat down with Matt Coffina, an equity strategist at Morningstar and editor of the Morningstar StockInvestor newsletter.

Question: If you do decide that a company's story really has changed, and you think the shares do look overvalued, how do you decide exactly when is the right time to pull the trigger and sell?

Coffina: That can be one of the hardest things for investors to do--recognizing when they were wrong and when it's time to move on. We need to be careful about what psychologists call "loss aversion," where investors often don't want to recognize a loss or admit that they're wrong. It could be very damaging to your wealth to stick with a company that's not quite what you thought it was just because you don't want to recognize that loss. You could end up with a much worse loss down the road.

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