Selling can make sense for several reasons, but first be clear about what changed and whether the timing is right to exit your position.
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A familiar investing rule says that staying invested usually beats trying to predict the perfect moment to buy or sell. In practice, that means holding on through market swings instead of trading every time prices move.
It's impossible to know in advance whether selling a leading stock or fund means catching its highest price - or giving up gains that come later. Usually, the sensible move is to hold on and let the stock market's long-term upward trend work in your favor.
"Deciding when to sell a share may be one of the toughest calls an investor makes," said Richard Hunter, head of markets at the investment platform Interactive Investor (ii).
"When the psychology of investing enters the picture, the decision gets murkier," Hunter said. "After a share price falls, people often hesitate to sell because doing so means admitting defeat - even when the company's prospects have clearly worsened."
If the shares have climbed as expected, the investor may hesitate to sell, worried that more gains could follow.
Still, selling can make sense when the decision rests on solid reasons and careful judgment - not on impulse or an attempt to predict the market's next move.
Profit-taking (selling a winner)
If a stock has risen sharply, selling it lets you lock in some of those gains.
"Some investors call this approach top-slicing," said Iis Hunter. "Suppose a 10,000 investment doubles to 20,000. Selling shares worth 10,000 recovers the original stake, while the remaining 10,000 stays invested and represents pure profit."
The amount you sell is your choice. You can keep most of your allocation rather than selling all of it - or even half. Just remember that any gain or loss remains unrealized until you sell.
Timing matters too. If the shares are not held in an ISA, a profitable sale could leave you liable for capital gains tax.
Limiting losses by selling a losing stock
An underperforming stock can be hard to hold onto. If you no longer believe the company can recover, selling may seem like the sensible choice.
You may have noticed that this is the reverse of taking profits. Hunter says the two approaches only seem to conflict; both can make perfect sense.
"Taking a profit is never wrong," he said, "but traders will tell you to let winning positions run and cut losing ones."
Before selling, ask whether the reason you bought the stock still holds. A price drop alone may not change that judgment; if you still believe the market has mispriced the company, the decline could even be a chance to buy more at a lower price.
Portfolio rebalancing
Review your portfolio periodically - once or twice a year, or perhaps every quarter - and adjust it back to your intended mix.
If you restore each holding to its previous portfolio share, you'll have to sell part of the stocks that performed best, since they now make up more of the portfolio than they did at the last rebalance.
Risk profiling
Your risk tolerance may change after you buy a stock, and that alone can be a good reason to sell it.
You may have bought a fast-growing stock a decade ago, when building your portfolio was the main goal. Retirement is now 10 years closer, so protecting the wealth you've accumulated may matter more than chasing further growth. Selling the shares and moving the proceeds into a more defensive investment - or one with a higher dividend yield - could therefore seem like the sensible choice.
"Go back to why you bought the shares," Hunter said. "Do those reasons still hold? And does the investment still match your goals?"
He added that no universal rule determines whether, or when, someone should sell. The right choice depends on the individual.
"He said there's no right or wrong time to sell, provided the investor is comfortable with the reasoning."
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