When to Sell
Understand when it actually makes sense to sell investments, and all the reasons you shouldn't (but think you should).
When to Sell
Key Takeaways
- Most selling is a mistake driven by emotion or temporary market movements rather than changed circumstances
- The best reason to sell is a changed life situation (you need money, your goals shifted, your asset is overdue for rebalancing)
- Selling because prices fell or seem high are the two most dangerous reasons to sell
The Default Position
The default should always be holding. Selling creates taxes, trading costs, and requires you to decide what to buy next. Each of those is a risk. Holding does none of those things.
This isn’t about being stubborn. It’s about recognizing that the strongest evidence most of us have is that staying invested in a diversified portfolio works better than trying to time things.
Reason to Sell: Your Circumstances Changed
Life changes. You lose your job. You have a medical crisis. Your child is getting college acceptance letters. You’re ready to retire. These are legitimate reasons to sell.
If you need the money for something real, that’s not a choice anymore. You sell what you need to sell and use the proceeds. This isn’t trading. This is funding your actual life with your actual investments.
The key is selling only what you need. If retirement requires $50,000 and your portfolio is $500,000, sell $50,000 worth. Don’t liquidate everything just because you’re in a selling mood.
Reason to Sell: Rebalancing
You started with a 60/40 portfolio (60% stocks, 40% bonds). Stocks have had a great decade, and now you’re 75/25. That’s not your plan anymore. That’s too aggressive for your situation.
You rebalance by selling some stocks and buying some bonds. You’re not trying to time the market. You’re not betting that stocks will fall. You’re just bringing your portfolio back to where you intended it to be.
Rebalancing feels counterintuitive because it forces you to sell winners. But that’s exactly the point. You’re trimming what’s gotten too big and boosting what’s fallen behind. Done annually or every couple years, it’s a painless way to sell without overthinking.
Reason to Sell: Your Investment Thesis Changed
You bought a fund or stock because you believed in something specific. The company was growing. The market was undervalued. The management team was talented. If that belief genuinely changed because facts changed, selling is reasonable.
This doesn’t mean “the stock went down so I was wrong.” That’s not a changed thesis. That’s just noise. A changed thesis means you learned something new that actually matters. The company’s business model broke. The fund manager left. The premise you bought on no longer holds.
Be honest with yourself about what changed. Did the world change, or did your nervousness change?
Reason to Sell: Tax-Loss Harvesting
If you own an investment that’s down significantly, selling it to realize the loss can offset capital gains elsewhere or reduce your taxable income. You can then buy a similar investment, so you stay in the market.
This is a legitimate, even clever reason to sell. It’s one of the few ways individual investors can outsmart the tax code. Work with a tax professional to do this correctly, but it’s worth doing.
Reason NOT to Sell: The Price Dropped
A falling price isn’t a reason to sell. If anything, it’s a reason to hold or buy. When prices drop, investors panic and sell. That’s when patient people with conviction buy.
The companies whose shares you own are worth what they’re worth. A 20% drop means those companies are 20% cheaper, not 20% worse. Unless the actual business got worse, a price drop is a buying opportunity, not a selling signal.
This is hard psychologically. Everyone feels the urge to sell in a crash. That urge is expensive. Most investors would be far wealthier if they simply never sold during crashes.
Reason NOT to Sell: The Price Skyrocketed
Equally dangerous is selling because something’s up a lot. “This stock is up 200%. I should take profits.” This is how people sell the best investments after the gains that matter most.
Amazon was up thousands of percent over a couple decades. Someone who sold after it was up 200% because it seemed “too high” missed 90% of the returns. There’s no market timer smart enough to know when “too high” actually means.
If your investment thesis still holds, and you’re staying diversified, a high price is not a reason to sell.
Reason NOT to Sell: You Need This for Market Timing
“I’m selling because I think the market will crash next year, and I’ll buy back in cheaper.” This is the most expensive trade most people ever make.
Approximately zero individual investors have proven they can do this consistently. Assuming you can is overconfidence. Assuming you can’t is just realism.
Reason NOT to Sell: Boredom
Maybe you own an index fund and nothing changes. There’s no drama. No news stories. No reason to think about it. This boredom is a feature, not a bug. That’s the entire point.
The urge to do something, anything, with your portfolio is a sign you should do nothing. The best investments are often the most boring.
When It Gets Complicated
Concentrated positions complicate things. If you have one stock that’s 50% of your portfolio because you work there or inherited it, that concentration is a real risk. Diversifying away from that over time is reasonable.
If you have a fund with an expense ratio above 0.5% or a manager with a poor track record, switching to something cheaper makes sense. That’s not emotional selling. That’s just rational reallocation.
Using Gallio to Track Decisions
When you’re tracking your portfolio alongside your goals in Gallio, it’s easier to see why you hold things. You’re not holding that index fund because you forgot about it. You’re holding it because it’s delivering on your goal.
Periodic briefings let you review your progress without getting swept up in daily noise. When you’re reviewing quarterly or annually, you see the full picture rather than reacting to temporary market moves.
The Framework That Works
Create a simple rule: You hold your diversified portfolio unless something material changes. Material changes include life circumstances (need to raise cash), rebalancing (back to your target), or a fundamental change in your investment thesis.
Everything else is noise. Price movements, news stories, market predictions, advice from friends: that’s all noise. Ignore it.
The investors who get wealthy are the ones who build a good portfolio and then mostly leave it alone. They don’t check prices daily. They don’t trade frequently. They don’t try to time things. They just hold, rebalance occasionally, and stay invested through the cycles.
Boring doesn’t sell magazines. But boring builds wealth.
Gallio helps you set profit and value targets for each position. When you reach a goal, you’ll know — no guessing, no emotional decisions.
When to Sell
Key Takeaways
- Most selling is a mistake driven by emotion or temporary market movements rather than changed circumstances
- The best reason to sell is a changed life situation (you need money, your goals shifted, your asset is overdue for rebalancing)
- Selling because prices fell or seem high are the two most dangerous reasons to sell
The Default Position
The default should always be holding. Selling creates taxes, trading costs, and requires you to decide what to buy next. Each of those is a risk. Holding does none of those things.
This isn’t about being stubborn. It’s about recognizing that the strongest evidence most of us have is that staying invested in a diversified portfolio works better than trying to time things.
Reason to Sell: Your Circumstances Changed
Life changes. You lose your job. You have a medical crisis. Your child is getting college acceptance letters. You’re ready to retire. These are legitimate reasons to sell.
If you need the money for something real, that’s not a choice anymore. You sell what you need to sell and use the proceeds. This isn’t trading. This is funding your actual life with your actual investments.
The key is selling only what you need. If retirement requires $50,000 and your portfolio is $500,000, sell $50,000 worth. Don’t liquidate everything just because you’re in a selling mood.
Reason to Sell: Rebalancing
You started with a 60/40 portfolio (60% stocks, 40% bonds). Stocks have had a great decade, and now you’re 75/25. That’s not your plan anymore. That’s too aggressive for your situation.
You rebalance by selling some stocks and buying some bonds. You’re not trying to time the market. You’re not betting that stocks will fall. You’re just bringing your portfolio back to where you intended it to be.
Rebalancing feels counterintuitive because it forces you to sell winners. But that’s exactly the point. You’re trimming what’s gotten too big and boosting what’s fallen behind. Done annually or every couple years, it’s a painless way to sell without overthinking.
Reason to Sell: Your Investment Thesis Changed
You bought a fund or stock because you believed in something specific. The company was growing. The market was undervalued. The management team was talented. If that belief genuinely changed because facts changed, selling is reasonable.
This doesn’t mean “the stock went down so I was wrong.” That’s not a changed thesis. That’s just noise. A changed thesis means you learned something new that actually matters. The company’s business model broke. The fund manager left. The premise you bought on no longer holds.
Be honest with yourself about what changed. Did the world change, or did your nervousness change?
Reason to Sell: Tax-Loss Harvesting
If you own an investment that’s down significantly, selling it to realize the loss can offset capital gains elsewhere or reduce your taxable income. You can then buy a similar investment, so you stay in the market.
This is a legitimate, even clever reason to sell. It’s one of the few ways individual investors can outsmart the tax code. Work with a tax professional to do this correctly, but it’s worth doing.
Reason NOT to Sell: The Price Dropped
A falling price isn’t a reason to sell. If anything, it’s a reason to hold or buy. When prices drop, investors panic and sell. That’s when patient people with conviction buy.
The companies whose shares you own are worth what they’re worth. A 20% drop means those companies are 20% cheaper, not 20% worse. Unless the actual business got worse, a price drop is a buying opportunity, not a selling signal.
This is hard psychologically. Everyone feels the urge to sell in a crash. That urge is expensive. Most investors would be far wealthier if they simply never sold during crashes.
Reason NOT to Sell: The Price Skyrocketed
Equally dangerous is selling because something’s up a lot. “This stock is up 200%. I should take profits.” This is how people sell the best investments after the gains that matter most.
Amazon was up thousands of percent over a couple decades. Someone who sold after it was up 200% because it seemed “too high” missed 90% of the returns. There’s no market timer smart enough to know when “too high” actually means.
If your investment thesis still holds, and you’re staying diversified, a high price is not a reason to sell.
Reason NOT to Sell: You Need This for Market Timing
“I’m selling because I think the market will crash next year, and I’ll buy back in cheaper.” This is the most expensive trade most people ever make.
Approximately zero individual investors have proven they can do this consistently. Assuming you can is overconfidence. Assuming you can’t is just realism.
Reason NOT to Sell: Boredom
Maybe you own an index fund and nothing changes. There’s no drama. No news stories. No reason to think about it. This boredom is a feature, not a bug. That’s the entire point.
The urge to do something, anything, with your portfolio is a sign you should do nothing. The best investments are often the most boring.
When It Gets Complicated
Concentrated positions complicate things. If you have one stock that’s 50% of your portfolio because you work there or inherited it, that concentration is a real risk. Diversifying away from that over time is reasonable.
If you have a fund with an expense ratio above 0.5% or a manager with a poor track record, switching to something cheaper makes sense. That’s not emotional selling. That’s just rational reallocation.
Using Gallio to Track Decisions
When you’re tracking your portfolio alongside your goals in Gallio, it’s easier to see why you hold things. You’re not holding that index fund because you forgot about it. You’re holding it because it’s delivering on your goal.
Periodic briefings let you review your progress without getting swept up in daily noise. When you’re reviewing quarterly or annually, you see the full picture rather than reacting to temporary market moves.
The Framework That Works
Create a simple rule: You hold your diversified portfolio unless something material changes. Material changes include life circumstances (need to raise cash), rebalancing (back to your target), or a fundamental change in your investment thesis.
Everything else is noise. Price movements, news stories, market predictions, advice from friends: that’s all noise. Ignore it.
The investors who get wealthy are the ones who build a good portfolio and then mostly leave it alone. They don’t check prices daily. They don’t trade frequently. They don’t try to time things. They just hold, rebalance occasionally, and stay invested through the cycles.
Boring doesn’t sell magazines. But boring builds wealth.
Gallio helps you set profit and value targets for each position. When you reach a goal, you’ll know — no guessing, no emotional decisions.