Welcome to Morningstar’s Personal Finance Minute, where we answer some common investor questions. Today, we’re looking at when you should sell an investment.
Selling is a key part of investing, but its one of the hardest decisions to make. To avoid seller’s regret, these are four tips for assessing whether you are making the right call.
So, in which situations would you be considering a sell?
Number one. Something fundamental has changed. For example, there’s been a management exit, scandals, profit warnings, the list goes on. This is the time to reassess an investment, however it's not an automatic sell signal.
Number two. Your own strategy has changed, through life changes. In these times, it's good to take a step back and revisit your goals. Think of this more as “rebalancing" of your portfolio, rather than "selling".
Number three. Your investment keeps underperforming. Now, an investment can't be a top-performer over every time period, (and we’ve seen plenty of proof of that recently). but a longer period of underperformance should be a signal that it's time to look at why the stock or fund is consistently lagging, and whether an alternative could serve you better.
Number four. Your investment is outperforming. As the saying goes, past performance is not a guide to future performance. Taking some profits can be a wise strategy in this case. But that doesn't mean you have to sell your entire holding.
This has been the personal finance minute. For Morningstar, I’m Sunniva Kolostyak.
