Wall Street analysts and brokers do a terrific job of telling investors which stocks to buy and why, but these same experts have failed miserably when it comes time to sell. As a result, the average investor is usually left to fend for himself when determining when it is most appropriate to sell their investments.

The good news is that there is an easy way for you to decide for yourself. In this article, we’ll give you a list of five telltale signs that you can use to determine whether it’s time to bail out of an investment.

Think about it. If things were so good, why would these front-line executives (who are typically well compensated for their efforts) be so eager to jump ship — especially without ample notice? There are valid reasons why a top manager might quit, including to garner a higher salary or to take on more responsibility. But as a matter of course, investors should view high-level departures as a red flag.

In 2001, Novell (Nasdaq: NOVL ), a well-known software maker, was in the midst of a major turnaround when its chief executive officer, Eric Schmidt, abruptly quit. After Schmidt left the company to join Google (Nasdaq: GOOG ), Novell lacked direction, and its sales waned. In fact, the firm wandered aimlessly for about a year until new management finally righted the ship through corporate restructuring and product refinement. However, making matters worse, Schmidt unloaded a portion of his stock position in the open market. The outcome was that Novell’s share price dropped from roughly $4.75 to below $2 in the following year. In this case, investors could have saved themselves a great deal of money had they sold off their stock once they heard this top officer had jumped ship.

An example of how this two strikes and you’re out rule works can be found in an analysis of medical device company Cyberonics (Nasdaq: CYBX ). In October 2005, it missed earnings estimates by a long shot. Management explained the shortfall, and the investment community took the first miss in stride. As a result, the stock barely budged in value.

But when the company missed earnings estimates in the following quarter, the market wasn’t as kind. Retail and institutional investors bailed en masse and shares declined in value by 40% in the following six months. If an investor had sold his Cyberonics shares immediately after the second earnings shortfall, the losses wouldn’t have been nearly as bad. Exiting a position as it is dropping is better than exiting when it has hit rock bottom.

3. Inventories Are On The Rise

When a company is growing its sales at a fast 10% clip, logic dictates that its merchandise inventories should be growing at about the same pace. However, if a company’s inventories are rising at a faster rate than its sales, this may indicate that the company is having trouble selling its merchandise.

The problem is that management only has a few remedies for such a situation, and none of them are good:

1. Option No.1: It could store the merchandise until a later date in the hope of selling it, but this costs a great deal of money in terms of holding costs.
2. Option No. 2: It could mark down the merchandise and that consumers will buy the product, but this method will definitely hurt profit. Remember, the retailer has the same cost basis for the goods regardless of the price at which it is able to sell them.
3. Option No.3: It could write off the inventory entirely, and chalk up the merchandise lot as a total loss.

Each of the above scenarios will have an adverse impact on earnings and, by extension, the company’s share price.

The good news for investors is that a company’s inventory levels are easy to check. Simply review the company’s last balance sheet (which may be obtained through the SEC’s website ). Under the heading assets , you’ll find an inventory number. Investors should compare that number to last year’s number, which is typically in the column right next to it. Is the inventory number growing at a markedly faster rate than sales? If it is, and the company isn’t gearing up for its big selling season, it may mean trouble. (For more information on balance sheets, check out Breaking Down The Balance Sheet . Reading The Balance Sheet and What You Need To Know About Financial Statements .)