When & Why Do Investors Sell Stock?

Eventually, there will come a time when you decide to sell some or all of the stock you own. However, for some investors, this can prove to be much more difficult than just picking up the phone and giving their stock broker the sell order.

In general, there are two main scenarios in which a stock market investor is likely to sell their stock.

The first is when the stock market is doing well, and the second is when the stock market is doing poorly and their stock prices have fallen in value.

Let’s have a brief look at each of these scenarios now.

Stock Market Up

Selling stock when it has risen in value comes with the following concerns:

Tax Implications

Selling stock under certain circumstances can affect your taxes, which may then cause you to reconsider selling your stocks because doing so will raise the amount of tax you pay.

Emotional Implications

Some investors who have owned a particular stock for many years may develop an emotional attachment to it. This is especially true if it has been kept within a family for a number of years.

Emotional attachments to stock can cause people to resist selling them, even if those stocks are performing poorly in the stock market.

Stock Market Down

The other major scenario in which a stock market investor is likely to sell their stock is when that stock has lost them money. During times such as this, investors should be aware of the following issues:

Tax Benefits

If you time the sale of your stocks correctly, you could minimise the amount of tax you pay. This can be a good reason to consider selling stock in the stock market, especially if it has not been performing well for you.

Pride

There is no such thing as a perfect stock market investor who gets it right all the time. When you sell stock and you realise that you have made a bad investment decision, don’t beat yourself up about it.

Everyone makes mistakes in the stock market, but if you can learn from those mistakes and move on, you will find you will become a much more experienced and capable stock market investor over time.

Separation Anxiety

Owning stock for many years can cause some investors to feel as though those stocks are a part of them. This can then create a reluctance to sell, even if it that stock is not performing well for them.

All stock market investors should see stocks for what they are, a way to help you achieve your financial goals and not something to develop an emotional attachment to.

Why Sell?

Regardless of whether stock prices have gone up or down, there are two major reasons which can cause a stock market investor to consider selling their stock.

1 – Need For Money

If you require money to pay off debt or buy a new home, then this may be a good time to sell some of that stock you own.

Ideally, it would be better to deal with such needs through proper financial planning, but there will always be certain unexpected expenditures which you can’t avoid.

Remember, stocks are there to serve you. So use them wisely, and only when you really need them.

2 – Stock Isn’t Performing As You Expected

Sometimes when you buy stock it doesn’t perform as well as you had expected or hoped. That’s just the nature of the stock market.

If you determine that a stock is not fulfilling your investment objectives or your wealth building goals, then it is time to unload that losing stock and move on.

Of course there is always the possibility that the stock value may increase in the future. It might, in which case you should hold onto it.

But if it has been consistently performing poorly, and you are fairly confident that it won’t improve in the future, then get rid of it as holding onto to such a stock will only lose you more money in the long run.