How to Decide When It’s Time to Sell Your Investments
If you want to be successful and experience a reliable profit flow within the financial markets, you’ll need to figure out when it’s time to sell your investments. There is an understandably challenging larning curve.
When it’s time to invest, you’ll quickly learn that timing is essential and can work in your favor. If doesn’t matter if you’re questioning whether you should sell your shares in a specific company or if you should sell an investment property.
The main reason you’re asking this question is because you want to make sure that when you sell, you’re getting the peak price. As the asset is beginning to bottom out, you’ll want to use the profits to grab onto another asset. It’s all about timing.
The main question surrounding it all involves when. When should you hold on and when should you sell? Thankfully, there are a few tried and true tips that can help you when you’re looking to start selling your investments.
Take Your Emotions Out
Think of this as a war. In a war, you’re going to have an enemy. In this case, when you’re dealing with investments, the enemy is your own emotions. It doesn’t matter if you’re buying or selling. Your emotions can get the best of you if you left them.
If you’ve ever seen a gambler continue to play the slot machines, their emotions keep them in front of the machine with the hopes that he’ll become a millionaire. Believe it or not, people do the same thing with investing. For many people, it can be really difficult to be deep inside and not walk away.
Most people can’t confess that they’ve lost and move forward. Instead, most people like to continue digging the hole. This denial will lead to failure. Look at the numbers. Do your due diligence and complete the necessary research. If your findings show you that an investment is going down in a bear market, cut ties and keep it moving.
When a market is booming, you’ve got to be careful too. Many investors start to get beside themselves and become greedy. Emotions might tell them that everything will remain on an upward path forever. This is virtually impossible.
You’ve got to be intentional about seeing the market from a rational perspective. Understand that all good things come to an end. You can’t forgo security for a quick high. It’s not worth it.
Though you’d like to believe the numbers won’t like to you, your emotions actually will. Keep that into consideration when it’s time to make an investment move.
Learn to Comprehend and Accept Fair Value
You can look at an investment from a few ways. Whether it’s stock, property or commodity, you’ve got to look at supply and demand. However, it doesn’t stop there.
For example, if you’ve purchased a security and understood it to be undervalued, yet it went higher than the price you thought it was worth, you might want to think about selling it.
Some might say that it would be better to think about how much it was worth when you did your research the first time, but things have changed, and you have to make a decision based on the current facts.
When you make this decision, don’t let your hopes, dreams, and wishes take over your rational thought process and steer the ship into a sinkhole.
If you go back and find that the security rose above the fair value, sell it. Timing is everything, and in this case, you’re working against the clock for a correction to happen. If you can get out at or above the true price, you’re in good shape.
You’ll also want to be extra careful with investments you have that haven’t responded to poor economic data, a dismal outlook or selloffs. If you have any investment that managed to forgo a downturn, try to get the data that’s as current as possible.
Always Remember the Fees
You’ll need to look at all the fees when you’re getting ready to sell an investment. Run these numbers because they’ll affect the profit you receive.
There are certain investments that have easy, upfront fees like a fixed price. On the other hand, other investments like mutual funds have a lot of fees that need to be taken off first. These fees include the management fee, the percentages of profit fee, early termination fee and others.
Get out a sheet of paper and compile a list of fees before you sell any investment. When you run these numbers, you’ll receive a better understanding of what your profit will actually look like.
You’ll be able to get a better grasp on how this works with your financial plan. In addition to all of the fees, you must always consider taxes. There are professional tax calculators that can help you navigate the tax process.
Look at Your Portfolio and Its Balance
You need to always keep an eye on the securities of your portfolio even during the times when it’s doing well.
If you’ve ever been in a position where you were too exposed to a specific area of the economy, chances are your risk factor can increase. To stay on top of everything, it’s good to diversify.
Additionally, rebalancing is a good way to remain proactive instead of reactive, and it stands as a great reason you’d want to sell.
Take a Good Look at Personal Goals
An exit strategy is a major part of a successful financial strategy. You’ll want to decide what your exit point will be. Usually, it surrounds a specific amount you’d like to make. Your goals could also surround retiring, a home purchase or the purchase of a car.
As your life continues to evolve, your goals might change. Take time to look at your goals and decide whether or not they’ve changed. If you’ve gone past the number you had in the beginning, it might be better to get out of the game and end on top.
You’ll have to make the choice regarding what you’d like to do. However, you must know that there really is no specific scientific answer regarding when you should sell.