Selling Shares of Stock: A Beginner's Guide

Selling shares of stock can be a great way to make some extra cash, but it's essential to understand the basics before diving in. To sell shares, you'll need to have a brokerage account, which allows you to buy and sell stocks.

You can sell shares through a brokerage firm, either online or in-person. Some popular online brokerages include Fidelity, Charles Schwab, and Robinhood.

There are several types of stock orders you can place when selling shares, including market orders and limit orders. A market order is executed at the current market price, while a limit order is executed at a specific price you set.

Before selling shares, it's crucial to consider the fees associated with the transaction. These fees can eat into your profits, so it's essential to factor them in when deciding whether to sell.

You have two main options when it comes to choosing a broker: online broking service or full service brokers. Online broking services are a great choice if you want to save on fees, with costs starting at around $20 per trade.

With online broking services, you'll pay a fee each time you buy or sell shares, but you'll have more control over your investments. Full service brokers, on the other hand, will do the trading for you and can offer advice on what to buy or sell.

Fees for full service brokers are typically a percentage of the trade value, and can range from 2.5% for small trades to 0.1% for larger transactions.

If you're not sure where to start, you can use the Australian Securities Exchange (ASX) find a broker tool to locate a broker that suits your needs.

Here are the key differences between online broking services and full service brokers:

Choosing an online broking service can be a great way to start investing in the stock market. You can open an online trading account and make your own investment decisions.

Fees for online broking services are generally lower compared to traditional brokerage firms. You'll pay a fee each time you buy or sell shares, starting at around $20.

Using a reputable online broking service can save you money in the long run, but it's essential to do your research and find a service that suits your needs.

Full Service Brokers can do the trading for you and advise on what to buy or sell. They must have a reasonable basis for their recommendations and disclose any interest they have in the investment.

Fees for Full Service Brokers are a percentage of the trade value.

The fee percentage can vary depending on the transaction size. For small trades worth a few thousand dollars, the fees can be relatively expensive.

A common fee structure is a minimum fee plus a percentage of the trade value. For example, the fee on a transaction of up to $5,000 may be 2.5%. For a large trade, the fee may be 0.1%.

Crowd-Sourced Funding can be a great way to raise money for your business, but it's essential to understand the different types. Donation-based crowd funding is typically used by artists or entrepreneurs to raise money for one-off projects.

There are two main types of crowd-sourced funding: Donation-based and Investment-based. This distinction is crucial when deciding which route to take.

Donation-based crowd funding is perfect for artists or entrepreneurs who need a one-time injection of funds for a specific project. On the other hand, Investment-based crowd funding may involve investing in a managed investment scheme or being offered by someone who doesn't need an Australian financial services (AFS) licence.

Investment-based crowd funding can be riskier, but it also offers the potential for higher returns. It's essential to weigh the risks and benefits before making a decision.

Here are the two main types of crowd-sourced funding:

A share of stock represents ownership in a company.

You can buy and sell shares on stock exchanges, such as the New York Stock Exchange (NYSE) or NASDAQ.

Each share has a unique identifier, known as a CUSIP number.

This number helps track and verify the ownership of the share.

The value of a share can fluctuate based on market demand and the company's financial performance.

To decide whether to invest in an IPO, you need to get your hands on the prospectus. This document contains crucial information about the company and the float.

A prospectus must be lodged with ASIC, so be sure to check it out on their Offer Notice Board. This is where you'll find the prospectus, so take a look.

The prospectus will tell you about the features of the shares on offer, how many are available, and how to apply to buy them. It's like a map to help you navigate the investment process.

It's essential to read the prospectus carefully, as it contains company information, operations, and financial position. This will give you a better understanding of the company's strengths and weaknesses.

If you're unsure about anything in the prospectus, don't hesitate to talk to a broker or financial adviser. They can help you make sense of it all.

Here are some key things to look for in a prospectus:

The Rule of 72 is a simple yet powerful tool that can help you understand how to grow your wealth over time. It's based on the idea that if you reinvest your profits, you can compound your gains and reach your financial goals faster.

To calculate the Rule of 72, you divide 72 by the percentage gain you have in a stock. This will tell you how many times you need to compound that gain to double your money. For example, if you get three 24% gains, you'll nearly double your money.

The Rule of 72 is not about getting a single huge profit, but rather about achieving smaller gains consistently over time. This approach can lead to big overall profits, as shown in the example of getting three 20%-25% gains.

Reinvesting your profits is key to making the Rule of 72 work for you. By doing so, you can take advantage of compound interest and watch your wealth grow.

Understanding Types of Sell Orders is crucial before cashing out a stock. Once an investor has decided to sell, there are several options for how to sell, each with different amounts of control over the sale.

Market orders are a common type of sell order, where the investor sells the stock at the current market price. This is a straightforward way to sell, but it may not always be the best price.

Limit orders allow investors to set a specific price at which they want to sell their stock. If the market price reaches this point, the order is executed. This gives investors more control over the sale price.

Stop-loss orders are used to limit losses by selling the stock when it falls to a certain price. This can help investors avoid further losses if the market turns against them.

Investors should carefully consider their goals and risk tolerance before choosing a sell order type.

Buying and selling shares can be a bit tricky, but understanding the basics can help you make informed decisions. You can buy or sell shares just like any other stock, and ETFs (exchange traded funds) allow you to diversify your portfolio without breaking the bank.

To sell a stock, you can place a market order, which will sell your shares at the current market price. This can be a good option if you want to sell quickly, but be aware that you have no control over the selling price.

You should always sell a stock if it falls 7%-8% below what you paid for it, as this can indicate a problem with the company or industry. This rule is based on over 130 years of stock market history and can help you protect your portfolio from potential losses.

If you're looking to take profits, consider selling at least some shares after a 20%-25% gain, as this can help you lock in gains and avoid watching your profits disappear in a stock market correction.

Here's a simple table to help you remember the key selling rules:

ETFs are a great way to diversify your portfolio without breaking the bank. You can invest in a group of shares that make up an index, such as the S&P/ASX 200, for a relatively low cost.

ETFs allow you to buy or sell them just like any other share, which is convenient.

You'll generally pay lower ongoing fees with ETFs compared to managed funds.

There are several types of buy options to consider when it comes to buying and selling shares. One common type is a buy-back offer, where a company you own shares in offers to purchase some of its own shares from you.

You might receive a buy-back offer, and before deciding what to do, consider the company's reasons for wanting to buy back its shares. The company might be distributing money back to shareholders or reducing administrative costs by buying out holders of small parcels of shares.

If you're happy with the company's prospects, you may prefer to keep your shares, but if you'd rather sell, a buy-back offer can be a convenient option since you won't have to pay a brokerage fee.

Here are some possible reasons why a company might make a buy-back offer:

A limit order is a type of sell order that allows you to set the minimum price you're willing to accept for your shares. This means you can control the selling price and potentially get a higher price than the current market rate.

For example, if you want to sell a stock currently trading at $50 per share and place a sell limit order at $55, the order will only be filled if the stock price rises to $55 or above. This gives you more control over the sale, but it also means your order might not go through instantly.

The upside of limit orders is that they help you avoid selling your shares at a low price. By setting a minimum price, you can ensure you get at least that amount for your shares.

Here are some key things to keep in mind when using limit orders:

By using limit orders, you can take a more strategic approach to selling your shares and potentially get a better price than the current market rate.

A market order is a great way to sell your shares, but it comes with some trade-offs. You'll accept the current market price, which may not be exactly what you want.

If you place a market order, your shares will be sold at the current market price per share, and the sell order will be placed immediately or when the market reopens if it's placed after hours. This can be a good option if you want to get out of a stock quickly.

However, with a market order, you have no control over the selling price, which may be higher or lower than you'd like. You'll also pay a transaction cost when you cross the bid-ask spread.

A Good Till Expiry (GTE) order stays open in the market until the expiry date, giving you the benefit of order queue priority.

You can nominate your own expiry date, or use your broker's default, which is often set at 20 trading days. This means you have some flexibility in how long you want your order to remain active.

However, the risk with a GTE order is that it could expose you to significant price swings, such as those caused by overnight international news and market moves. This could result in a loss.

The risk is higher during times of greater market volatility, like the COVID-19 pandemic, when markets can be particularly unpredictable.

A market order is a type of order that sells your shares at the current market price per share, which can be executed quickly but leaves you with no control over the selling price.

It's essential to protect your capital, and one way to do that is to sell a stock if it falls 7%-8% below what you paid for it. This simple rule helps you cap your potential downside and reduce your exposure.

This rule is based on over 130 years of stock market history, which shows that even the best stocks typically don't fall more than 8% below their ideal buy points.

If your stock does decline more than 8% below the ideal buy point, it usually means something is wrong, and you should immediately shift into capital-preservation mode and cut that loss short.

Limiting your loss to 7% or 8% can help you avoid a potentially crippling loss, and your top priority should always be to preserve capital.

Market volatility can be intense, like during the COVID-19 pandemic, causing share prices to change dramatically in a short time.

It's really hard to time the market, so it's essential to take a step back and think before making a trade.

Transaction costs can add up if you buy or sell too frequently, and it might not be worth it.

Sometimes, a trading halt is placed on shares, allowing the market to digest new information about a company.

Prices can fall and volatility may increase during trading halts, making it difficult to sell your shares when you want.

Markets typically recover over the longer-term, so it's crucial to look beyond recent events when evaluating share performance.

If you receive an unexpected letter offering to buy your shares, don't rush into accepting it without checking a few things first. You can use ASIC Connect to search for the company making the offer and verify if they sent you the offer.

It's essential to check if the offer is from a legitimate company. You can do this by searching within 'organisation and business names' on ASIC Connect. This will give you a clear picture of the company's details.

Before accepting the offer, you should also check why it's being made. Is something about to happen to your shares? Check company announcements on the ASX or contact your broker to see if you've missed any important market news.

You'll also want to get an up-to-date market price for your shares and compare it with the price in the offer. You can get this information from the company, the ASX, or your broker.

The offer letter must be dated and give you at least one month to accept. Make sure you understand the payment terms, including how often instalments will be paid.

Here's a quick checklist to ensure you're making an informed decision:

If you believe the offer is misleading, report it to ASIC by visiting their website or calling 1300 300 630.

The 7-8% sell rule is a time-tested principle that helps you protect your gains and prevent significant losses. This rule is based on decades of stock market history, covering over 130 years of data.

To apply this rule, you need to sell a stock if it falls 7-8% below its ideal buy point. This means if you bought a stock at 100 and it drops to 92 or 93, it's time to sell. However, if the stock goes up to 150 and then slips 8% to $138, that doesn't trigger the sell rule yet.

The 7-8% sell rule is not just a random number; it's based on the idea that even the best stocks will sometimes break out and then pull back slightly. But if they do, they usually don't fall more than 8% below their proper entry prices.

Here's an example of how this rule works:

Keep in mind that this rule is not a hard and fast rule, and you may need to adjust it based on your individual circumstances. However, it's a good starting point for learning when to sell stocks and protect your gains.

Remember, the goal of the 7-8% sell rule is to help you avoid taking a big hit to your portfolio. By selling at the right time, you can limit your losses and preserve your capital.

You can sell a stock for a higher price than you paid and get your original investment back, plus your gains, minus any fees.

The proceeds from the sale will include your original investment plus your gains, minus any fees, if you sold your stock at a higher price than you paid.

If you sold your stock at a lower price than you paid, your total return will be less than your original investment, minus any fees.

You can end up with a negative return if you sell your stock for less than you paid, which means you'll lose some or all of your original investment.

Selling a stock for less than you paid is essentially taking an overall loss, minus any fees you might have incurred.

You need to rebalance your portfolio periodically to ensure it remains aligned with your investment goals. This may involve selling some stock to reallocate your resources.

One common reason to rebalance is if you own a high-performing stock that represents a large portion of your portfolio's value. You may choose to sell part of your stock to reduce your exposure to a single company.

Another reason to rebalance is to reduce your stock exposure as you get closer to retirement. A popular rule of thumb is to subtract your age from 110 to determine the percentage of your portfolio that should be invested in stocks.

Here are some scenarios where selling stocks at a loss might make sense:

• Industry-wide hardships: If numerous companies in one sector experience financial calamity, it may be wise to sell specific stock holdings to prevent deeper losses.

• Reduced or eliminated shareholder dividends: If a company reduces or eliminates its dividend payments, it may no longer be part of your investment strategy, and selling the stock is a good decision.

Employee share schemes can be a great way to own a part of your company, and some workplaces offer them as a benefit to employees.

You may get shares, or the opportunity to buy shares, via an employee share scheme at your workplace.

You could get a discount on the market price, and may not have to pay a brokerage fee.

Check if there are restrictions on when you can buy, sell or access the shares.

If a company you own shares in offers to buy back some of its shares, you'll need to consider their reasons for doing so.

The company may want to distribute money back to shareholders, or it might be reducing administrative costs by buying out holders of small parcels of shares.

You should think carefully about whether this is a good time to sell. If you're happy with the company's prospects, you may prefer to keep your shares.

Selling via a buy-back offer means you won't have to pay a brokerage fee, which can be a significant saving.

Investors sell stocks to pay for living expenses, as it can be a way to access cash from their investments.

Regularly selling stocks to cash out profits or avoid significant losses is a common practice among some investors.

Understanding the motivation behind selling stocks is crucial in managing a portfolio effectively.

Some investors might sell stocks because they need the cash to cover their daily expenses, such as rent or mortgage payments.

Selling stocks to avoid losses can be a smart decision, especially if the stock is performing poorly.

Investors who sell stocks for various reasons can benefit from understanding their motivations, which can help them make informed decisions about their portfolio.

Rebalancing your portfolio is an essential part of managing your investments. It's a process that helps you maintain a balanced mix of stocks, bonds, and other assets in your portfolio, which can become unbalanced over time.

You need to rebalance your portfolio periodically to ensure it remains aligned with your investment goals and risk tolerance. Two common circumstances that may require rebalancing include owning a high-performing stock that represents a large portion of your portfolio's value, and seeking to reduce your stock exposure as you approach retirement.

If you own a high-performing stock, you may choose to sell part of your shares to avoid overexposure to a single company. This is a good problem to have, but it's essential to maintain a diversified portfolio to minimize risk.

One popular rule of thumb is to subtract your age from 110 to determine the percentage of your portfolio that should be invested in stocks. For example, if you're 60 years old, your portfolio should be invested in 50% stocks (110 - 60 = 50).

Here are some scenarios where rebalancing may be necessary:

By rebalancing your portfolio, you can ensure it remains aligned with your investment goals and risk tolerance, and avoid potential losses or overexposure to a single company.

Reinvesting profits can be a great way to benefit from potential compound growth, allowing your investments to snowball over time.

Reinvesting profits can also help you diversify your portfolio, spreading your risk and increasing your chances of long-term success.

However, it's essential to consider the potential risks associated with reinvesting profits, including exposure to market risk.

This means that if the market takes a downturn, the value of your investments could decrease, potentially leading to losses.

But, if you're willing to take on some level of risk, reinvesting profits can be a powerful strategy for building wealth over time.

ISAs are a great way to save and invest, and one of the most popular types is the Stocks and Shares ISA. A tax-efficient way to save and pay no income tax or capital gains tax on any returns.

In the UK, ISAs are a tax-free savings option that allows you to save up to a certain amount each year. This can be a fantastic way to grow your wealth over time without worrying about taxes eating into your returns.