I bought 100 shares of a company... Now it's 30% up. What happens if i sell it and again buy same share?
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This might be basic, but i am unable to figure out. I have 100 shares of X company. The share got up by 30% now. I was thinking of selling it and again buying it immediately at the value i sell it. Is this profit? What i believe is, I have made the 30% from it, and now, unless the share goes bellow the value i buy it again(the current value), i am in profit. The share is of a good company so i don't want to sell it... Hence "Sell and Buy" thing came to my mind... Your Valuable Guidance is really appreciated! Thanks and Best Regards.
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Answer:
This is not a good idea, here are a few reasons. First, you have to see this from a value-of-holdings point of view. Selling something of a given value for a certain price and then buying that same thing back at the same price changes nothing. You still end up holding the same amount of product at the same value, your bottom line has not changed. However, this transaction will actually lose you money for the commissions you have to pay, and because once you actually receive the money from selling the stock, it counts as taxable income. Bottom line, you lose money. A better idea is to re-examine your holdings. Take a close look at your stock. Does it still have room to grow? Is that growth worth holding the stock? Most importantly, how much can you stand to lose if the stock falls? Here's what you do: Take a risk assessment. Decide how much the stock may fall and adjust how many shares you keep accordingly. Compare the chances of gains with the risk of losses to decide how many shares to sell and how many to hold. No matter what, as the stock rises you should continue to take off some a little at a time so you create a safety zone should the stock fall. How much you take off each time is up to you, based on chances of gain/risk of losses. If you want to be safe, take off larger chunks as the stock gains. Just don't sell shares too often, lest you be buried in commission costs.
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