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Stocks rose this past Friday after Fed chair Jerome Powell indicated that rate cuts are coming in the near future.

The Dow surged 1.3%, with the Nasdaq adding 1.4% and the S&P 500 rising 1.45% over this past week.

Powell did not provide any specific information on when we can expect rates to fall or by how much, but there’s more confidence in the market that it will happen.

“The direction of travel is clear” said Powell, “the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks”.

Investors aren’t projecting a complete 180, but we’re starting to see a trend in the right direction.

DD’s take: As rates fall further, two industries will see a big impact. Financials and REITs. These are two sectors in which I’ve been buying heavily since rates started rising. The fall in rates will make money cheaper, which is advantageous to both of these sectors.

Remember: buy damaged stocks, not damaged companies.

When To Sell A Stock

If I had a penny for every time someone asked me if they should sell, I’d be off the grid somewhere sipping margaritas.

Every single day, people ask me “Alex, do you think I should sell Stock ABC?”

I understand, knowing when to sell takes a different type of mindset.

And there are plenty of reasons to sell.

But there are also plenty of reasons not to sell.

In today’s post, I’m going to take you through the 4 good reasons to sell out of a stock.

Whether it’s due to stock market performance, company management or your own poor decision making, we’re going to cover all 4 in depth.

After you read this newsletter, you’ll no longer have to consult the internet for advice on when to sell, because you’ll have all the tools to know if you should.

But first, a quick word from our sponsor…

4 Good Reasons To Sell A Stock

1) You Made A Mistake

We’re human. We all make mistakes. But the sooner you realize it the better.

Sometimes it turns out that a business wasn’t what we thought it was when we purchased the stock.

Maybe their moat is narrower than you thought, maybe management isn’t as competent as you hoped, or maybe the competition is just much greater than you expected.

John Keynes said it best…

“When the facts change, I change my mind.”

Don’t take this quote lightly. Admitting you’ve made a mistake and taking responsibility is tough, but losing all of your investment because you couldn’t put your ego aside is even tougher.

2) You Found Something Better

The goal of investing is simple: to earn the highest rate of return possible while taking on the least amount of risk.

Business fundamentals are always changing and so is our economic environment. With that comes new investing opportunities that continue to present themselves and pass us by.

If you find a stock that you like better than the one you already own, it may be time to sell to free up some cash.

You don’t always have to contribute more of your own money to buy into new positions.

Sometimes reallocating funds within your portfolio is the best strategy.

3) Tax Purposes

If you’ve experienced losses in some of your positions, you may want to consider selling them to take advantage of tax-loss harvesting.

Tax-loss harvesting allows you to save on your tax bill by offsetting income and capital gains with your losses.

You can read more about the strategy here.

My suggestion: don’t let tax breaks dictate your investment decisions. Tax-loss harvesting is a great strategy if you’re selling a loser that you don’t want to own anymore, but if you’re selling out of quality investment just for the tax break, its going to backfire on you.

4) Valuations Are No Longer Valid

It’s no secret that the market often overreacts.

And sometimes, the market can get overly optimistic about the future earnings of a business, driving the stock price to levels that are simply unsustainable.

When this happens, it may be a good time to sell out of the stock.

As investors we have to realize when a stock is overvalued and when it is undervalued. This is a skill that takes many investors years to learn, but one that will serve you well with your analysis.

The words “taking profits” are ringing in my ear as I write this. And sometimes, we’re reluctant to take profits because we want to see the stock price continue to run up.

However, as a logical investor, its your duty to analyze if the valuation for that specific company makes sense.

If not, it’s time to sell.

If you’re having trouble analyzing dividend stocks and want a step-by-step checklist you can use to find the best companies in the market.

We’ve got you covered.

Introducing Dividend Dominator’s Dividend Stock Checklist.

I’ve included some of the most important metrics to look at when analyzing dividend stocks.

Now you can have this by your side and check off the boxes one by one to be more confident you’re making the right investment decisions.

See you in the next one!

Alex (The Dividend Dominator)
Founder and CEO of Dividend Domination Inc.
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