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Factors to Consider: Before Selling Equity Investments


Thinking about selling your equity investments? Consider these factors and ask yourself five questions before you sell.

When it comes to equity investments, many people follow the logic of buying low and selling high.  This is generally is a sound rule to follow, however, you should also consider important factors in your life and your financial plan before selling your equity investments.  Remember the stock market is cyclical and there will always be periods of ups and downs.  If you are currently considering selling your equity investments and moving them to cash, then you should keep these factors in mind.

The stock market took a drop – I need to sell now to avoid losses:

When the stock market starts to decline, many people's initial reaction is to sell their investments and make the move to cash.  Seeing your investments go down can cause you to worry, but you should remember that the market does not go down forever and when you sell at the bottom you risk missing out on potential future gains.  History has shown us that over a 70-year time frame (1970-2020) the S&P 500 Index was up 53.8% of the days and down 46.2% of the days1.  This illustrates that over time, you can benefit from staying invested in the market versus selling and holding cash.

Of course, there could be instances where the market goes down, and selling is suitable for your portfolio.  For example, if you are approaching an upcoming financial goal and cannot handle significant losses, discuss your concerns with your financial advisor.  Your advisor should be able to tell you how much of a loss your portfolio can handle and how it impacts your goals.  It is essential to understand whether you are selling because you think you need to versus selling because it is the right time to pursue your upcoming goals.

The market is going up – I want to sell while my account value is up:

Another time that your instincts might tell you to sell is when the equity market starts to rise.  When you see your account balance go up, you might start to think of ways to spend that extra money.  Selling when the market is high can make sense for various reasons.  There may be a purchase you would like to make, or maybe you would like to have additional cash in savings, or you are worried the market might start to go down.  While these are sound reasons, it is also important to consider your goals and your whole financial picture.

Your financial advisor might tell you that now is an excellent time to sell if you are close to reaching or have reached one of your short or long-term goals, if you are planning on buying a house, or planning a wedding, or if you need to replenish your emergency savings.  Your financial advisor should also be a resource for you as you are contemplating this decision.  She or he should be able to not only let you know if now is a good time and also how much you should sell.  If you do have an upcoming life event that requires a significant amount of cash, it does not mean that you need to sell your entire portfolio.  

Then when should I sell?

There is no universal right or wrong time to sell your investments. When deciding to sell, consider the factors above and ask yourself a few questions to help you make a decision.

  • Are you selling because you think it is a good time to sell or because it is part of your financial plan?
  • Are you selling for a spur-of-the-moment purchase or for a life event that you have been planning for?
  • Will selling now positively impact your financial plan?
  • What type of account are you selling in? What are the tax implications?
  • Have you discussed with your financial advisor?

A recent and personal example in my life where I had to decide whether to sell my investments was in 2019 during the final stages of planning my wedding. I had been saving and investing in a taxable investment account for over 10 years with the goal to use this investment to have the wedding of my dreams. I decided to sell in my portfolio because I knew I had upcoming expenses to pay, I did not want to risk losing any of the gains in the portfolio, and I wanted to pay the taxes in 2019 instead in 2020. Considering these factors, I had confidence in my decision to sell my stock investments.

Having a financial plan that considers your short and long-term goals will help you sell at the right time.  If you are debating selling some of your investments and are not sure how it will impact your plan and goals – we can help.  We would welcome the opportunity to talk to you about your current financial plan and make sure that it considers all your goals. 

  1. Crestmont Research. "Percentage Positive and Negative Days Across Various Periods: S&P 500 Index." Accessed May 22, 2021.


About the author:







The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Investing involves risk including loss of principal. No strategy assures success or protects against loss.

Wealth management (i.e. WELLth) services are provided separately from retirement plan consulting services you may receive from SRP as a result of participation in your employer's retirement plan. They may involve an advisory agreement and/or an additional fee.

All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

The S&P 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.