3 Questions to Ask Before Selling Your Investment

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3 Questions to Ask Before Selling Your InvestmentIt’s one of the most commonly asked questions a financial advisor hears from clients: “how do I know if I should sell my investment?” Unfortunately, the answer isn’t all that black and white. There’s no mathematical formula to outline if you should sell a stock or bond after x-amount of years.

The most important thing to note is that everyone’s financial journey is different. One person might be comfortable selling their investments sooner than someone else. The reasons for that decision also vary greatly. You need to have a clear understanding of your financial goals and determine your comfort zone as an investor.

Many people sell impulsively based on the poor performance of a stock or bond over a select period. These kinds of gut reactions can be detrimental to your portfolio and lose you money. If you're indeed ready to sell, you have to make sure you’re doing it for the right reasons. We’re here to help guide you towards them.

Is Your Portfolio Balanced?

This is a common scenario a lot of people find themselves in if they’re a first-time investor or investing without the help of a financial advisor. They get excited about a particular company or industry and decide to put all their eggs in one basket. They’re so confident that they’ll make money that they buy a bunch of stocks in one sector.

While it's not a bad thing to get excited about a company or industry you want to invest in, it can also be precarious. Diversifying your portfolio can help you avoid that risk. By having a balanced portfolio with several different investments and investment types, you're essentially yourself so you won't lose everything at once.

If you find yourself in a situation where you’ve put all your investments into one sector, it may be a good time to readjust and sell some of them. This isn't about admitting failure. It's about building towards a more balanced portfolio that will be more secure for whatever financial goals you’re hoping to achieve.

Do You Need Money Now?

Life happens. Plans change. You might be happy with the money you’ve put into your investments right now, and that's great! But that doesn’t mean you will be in three or four years when a significant life event occurs. It could be money you need for a new business, paying for college, or purchasing a home. Whatever it is — you need that money now.

This is obviously a decision that depends on your financial situation. If you have a lot of money tied up in stocks and that money could help you achieve a goal, that could be reason enough to sell. Even if the gains aren’t as much as you were hoping, being forced to make this kind of decision will depend on how urgent your need for that capital is.

Have You Done Your Research?

Investing isn’t gambling. You’re not pulling the lever on a slot machine and hoping for the best. Making smart investments is based on strong data and analytical decision-making that tracks performance and return.

If you’ve done your research about why you may want to sell an investment, you’re likely in the clear. If you haven’t, that’s another story. Whatever your actual reason is for selling an investment, you need to do your research. Understand market trends for stocks and take time to determine how much capital you stand to gain by selling any investments you may have.

There's nothing wrong with selling a stock, but it has to be a decision that's fully thought-out beforehand. One of the best things to do is to sit down with a trusted financial advisor who can offer you analytical advice from experience. Contact us today if you’re considering selling an investment. We’ll make sure you’re equipped with the right information for whatever decision you make.

Ocean Wealth