When Should You Sell Your Investments?

Watch It On YouTube:

Apart from the question of “Is this a good time to invest” the next most frequently asked question would probably be “when should I sell off my investment?”

In this video, I would like to share with you the 3 scenarios where it may be the right time for you to sell off your investments – be it partially or fully.

Without further ado, lets get started.

1. When you are progressing steadily towards your objective

The first situation where you should sell off your investments is when you are progressing steadily towards your investment objective.

In times like this, what you should do is to reassess the type of risk and return that you need to achieve your investment objective.

From there, you then amend your existing investment portfolio to reflect the accurate risk and return exposure and that will require you to start selling off part of your existing investments and rebalance it to something else.

The reason why you need to do this is that as you progress steadily towards your investment objective, there is no reason for you to take on as much risk as you did 10 or 20 years ago just to chase after a potential return that you no longer need.

The last thing you want is for your progress to be wiped out by a recession or a financial crisis when you are just a few steps away from achieving your investment objective.

As to how much exactly should you sell, that is something you will have to work out on your own or consult your financial advisor as it depends on your financial plan and it isn’t something a 5 min YouTube video can help you out with.

2. When the fundamentals or valuation changes for the worst

The second situation where you should sell off your investment is when the underlying fundamentals or the valuation that you are paying for changes for the worst to a point where it doesn’t make sense anymore.

On the topic of fundamentals, when the nature and the health of the underlying investment change to become quite different from what you originally expected when you initially invested, it is time to sell.

After all, what is the point of holding on to an investment that had changed to become something that is unable to provide you with what you need in relation to your investment objective?

On the topic of valuation, when the valuation of the investment increases so much until a point where it is too expensive to be either bought or held on. It is time to sell.

After all, what is the point of holding on to an expensive investment when there are alternatives that essentially provides the same exposure that you need at a much lower price?

3. When you find something better

Unlike the first two situations where it is clear that you should sell off your investments – be it partially or fully – the third situation is a little bit tricky as it relies heavily on your ability to accurately determine if something is better to invest in.

As to what constitutes a “better investment”, there are two criteria that I look out for and they are:

1. alignment to investment strategy

2. either a higher growth potential at a similar valuation or similar growth potential at a lower valuation

Let’s explain.

if an investment is not aligned to your strategy, you should not include it in your portfolio regardless of how attractive it may be as it will ruin your entire portfolio.

For example, if your strategy is to capture the Asia region’s growth in the next 10 years, it doesn’t make sense for you to sell off your Asia exposure in pursuit of something else unless your strategy changes.

If an investment is aligned to your strategy, I will consider it to be a better option if it provides either a higher future growth potential at a similar valuation or similar growth potential at a lower valuation.

Essentially, what this means is that I am either getting something better for the same price or getting something similar at a lower price.

That is what is necessary for me to want to sell my existing investments and use the proceeds to invest in something else.

Summary

Being able to accurately determine an exit point for your investment is important as it will make or break your overall return on your investment.

To recap, you should consider selling off your investments be it partially or fully

1. if you are progressing steadily towards your investment objective

2. when the fundamentals or valuation changes for the worst

3. when you find something better

Now, if you do not know how to get started with your investments or if you do not have the time to manage your investments, you can check out what I do here to see how you can benefit from my investment planning services and reach out to me directly.

Daniel is a Licensed Independent Financial Consultant with MAS and a certified Associate Wealth Planner that provides:

Connect with me on social media platforms to receive updates on future content! You can also slide into my DMs if you have any questions :)

---

Disclaimer:

This article is meant to be the opinion of the author

This article is for information purposes only

This article should not be seen as financial advice

This advertisement has not been reviewed by the Monetary Authority of Singapore