If you’re in the stock market then there’s going to be a time when you think about selling. Or maybe it’s when you think about how you shouldn’t have sold. A bunch of what ifs and what nots could be your doom if you let it. It can ruin your portfolio, possibly, but it WILL drive you crazy.
Years of research from the “smart people” has shown that to buy and hold is the smartest strategy. Especially the younger you are since they have the longest time to recover from a down market. I agree with this strategy for the most part, mainly because it’s the easiest for anyone to follow. However, I do think it’s best if you follow whatever strategy works best for you. Whatever strategy you can be sure to follow.
The key thing is to follow through with your strategy. Whatever you decide you want to do, follow through with it. You won’t really know how well a plan pans out until you let it happen. So just let it happen! Now, I’m not saying don’t put any contingencies along the way to alter your strategy, because you should do that. Just keep everything consistent and balanced.
Balanced out strategy
Balance is important everywhere and that includes in your stock portfolio. You can’t just go picking up stocks left and right without purpose. Get yourself spread out into multiple sectors and keep your holdings in balance.
Keeping things in balance will sometimes mean that you should sell a portion of a stock to lower your overall stock portfolio risk.
For example lets say you started with 5 balanced stocks each having $1000 in value. Then, let’s say that 3 years from now the value of the stocks has changed. To be dramatic and keep things simple, lets say one of the stocks has tripled in value, while one other stock has dropped in half. The rest remained the same. So the value of each stock is now $500, $1000, $1000, $1000, $3000.
What you could do is sell some of your stock that is valued at $3000 in total so that it is knocked down closer to the rest of the individual holdings (which are $1k and $500). You could decide to sell half of it to take profits now. Don’t forget to think about your tax implications when you sell. You’ll have to pay taxes on the gains eventually, just keep that in mind before you sell.
Ofcourse, you should just sell without a plan. It should be calculated and thought through, not something that you do on a whim. This is part of your plan remember? You had planned to sell the stock when it reached a certain high, or a certain percentage of your portfolio, or because it just made a triple top on the graph. Or it could be because 2 or more of these reasons has panned out. Whatever the plan is for you, follow through.
If you’ve done your homework and made a plan then following through is the final piece of that puzzle. Just make the market work for you, whichever way you want.