The three reasons to sell a stock

Buy, sell, hold! How can you determine when to buy or sell stocks? The financial media has made the stock market confusing and hard for you to understand. Every “expert” has an opinion and nothing seems to make sense. Many investors, like you, are in a constant search of that one person who knows all the answers and can “beat” the market.

Did you know that about 66% of money managers for large company funds didn’t ‘beat’ the S&P 500 last year? Over the last 15 years, it’s even worse: a 92% failure rate. This proves that even the pros don’t know what is going to happen with the markets.

Making a financial plan is the best way to help grow and protect your money consistent with your risk tolerance. Investing is a long-term commitment. It is very difficult to successfully trade the market. However, Simply Money Advisors understands that there are times when you need to adjust your investment mix or may need extra cash. Simply Money Advisors believes there are three common reasons why you should consider selling a stock:

#1: There is something fundamentally wrong with the company 

Take for example a company like Blockbuster. This company was a staple in many strip malls. With the creation of Netflix and on-demand services, it was a struggle to compete. Blockbuster didn’t change its business plan in enough time to turn the company around. Digital rentals were the way of the future. In 2011, Blockbuster closed its remaining 300 stores.

If you have stock in a company that doesn’t seem to be adjusting to consumer trends in its industry, it may be time to sell. You don’t want to wait until it is too late. 

#2: If you need the money 

There may be times when you are strapped for cash. You may have underestimated your tax bill or need extra cash for some house repairs. Whatever you need the money for, make sure you talk to your tax advisor and financial advisor before selling any stock. You want to make sure you understand the tax implications before you make any change to your investment mix.

Simply Money Advisors recommend that you have an emergency fund (3-6 months of your income) in savings for situations like this. If you plan now you may not have to sell your stock. Remember, investing is meant to be a long-term game.

#3: If other investment options might be a better fit for you 

Simply Money Advisors suggest creating a personalized financial plan that is right for your goals and lifestyle. There is not a “one size fits all” plan. Your financial advisor is a great resource for helping you establish this plan. By developing a financial plan that is in line with your financial goals, you may discover that your stock in a certain company doesn’t fit anymore. There may be another option that is more suitable for your goals.

The Simply Money Point 

Everyone has a different financial plan and different financial needs. Sometimes it is okay to adjust based on a change in your lifestyle. Sitting down with a financial advisor and developing a financial plan will help you navigate through the right investment decisions.

Wondering about some of the stocks you own and if they fit into your financial plan? We invite you to speak with our team at Simply Money Advisors.

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