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Should You Sell When Your Stocks Stop Growing?

Buy low, sell high. That’s the refrain uttered by financial advisors everywhere. But for some

investors, this mantra is easier said than done—especially as they watch their stocks slip

and slide down in value like many have during the first few weeks of 2016.

It’s easy to hang on when your stocks are going up in value, but when they stop growing as

rapidly or start losing value, investors often panic and make the mistake of selling too soon.

It’s impossible for a blog post to give you personalized financial advice, but I can list some of

the things you need to consider before you liquidate losing or stagnant stocks. This will at

least give you a starting point in your discussion with your financial advisor.

1. Think about your overall goals. Your goals should be one of the primary drivers of

your decisions to buy or sell. For example, if your goal is to invest in income-

generating dividend stocks, then market value might not be as big a consideration.

2. Consider your overall time horizon. It’s not just your goals you need to factor in but

also the time you need to access the value of the holdings in your portfolio. If you

need to access cash for income soon, then holding on to losing stocks might not be a

good idea. If, however, you have time to wait for them to recover, you might be

better off holding them.

3. Re-evaluate your risk tolerance. It’s easy to assume you have a high risk tolerance

when all your holdings are performing well—but when you’re facing losses and a

protracted downhill slide, you may find that you’re not as risk tolerant as you first

thought.

4. Consider the benefit of a loss. Taking losses on stocks can be beneficial come tax

time. Losses offset gains and can reduce your overall tax liability, although this only

works with a nonqualified account.

5. Look at your other sources of liquidity and income. When you have other assets, like

cash value life insurance and annuities, then you have other ways of gaining income

that can give you the financial breathing room you need to hold your stocks until

they recover.

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