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3 Tips for Selling Investments

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3 Tips for Selling Investments

AFL’s JoAnne Reilly

Key Points

  • Knowing when to sell is just as important to building wealth as knowing when to buy
  • Emotional decision making could impair your ability to make good long-term choices
  • Rebalancing your portfolio on a regular basis can help lock in gains and avoid losses

On May 17, 2017, the Dow Jones Industrial Average Index dropped 373 points after a series of turbulent news days coming out of Washington D.C. In June of last year, it dropped nearly 900 points in two days after news that the U.K. voted to leave the European Union. Yet actual change in D.C. seems to happen at a slower pace — and the immediate fallout from Brexit was far less dramatic than expected.

The common denominator in these massive market selloffs? Human emotion — or the idea that events will be catastrophic when the reality is much less so. “Changes in the economy, the markets, your personal financial situation and investing goals are often much more important drivers of when to sell than political events,” says Mike Greene, Senior Vice President of Financial Planning at Ameriprise Financial.

There’s no doubt that selling smart is an important way to help meet your retirement planning goals. But it isn’t just a matter of getting rid of losers or taking gains from winners. Understanding why your advisor is recommending the sale or purchase of securities to meet asset allocation goals can take some of the mystery out of the selling process. Here are three questions to guide the conversation next time you meet.


Have I taken emotion out of the decision?
It’s natural to become emotionally invested in financial decisions, but letting feelings dictate actions can be unwise. When markets are falling, fear and worry may make you want to get out before the damage gets worse. When the markets are hot, you may naturally want to get in on the upswing.

But selling when markets are dropping could mean losing out on opportunities when markets rebound. And buying when prices are high or investments are potentially overvalued may mean you don’t ultimately see much gain.

“You want to avoid the ‘buy high, sell low’ scenario,” Greene says. “That’s why it’s important to have clear benchmarks to use when determining whether or not an investment is still fulfilling your objectives.”



Do I need to rebalance my portfolio?

Setting your portfolio to auto rebalance at least once a year to stay in line with the right mix of stocks, bonds and other investments can also help take the emotion out of selling. In addition, if the equity side of your portfolio has grown from a predetermined 60% to 70%, for example, you may want to reinvest some of those gains in fixed income or other asset categories.

“Unfortunately, selling a high-performing investment can be hard to do,” Greene says. “No one wants to let go of a winner.” In behavioral economics, this tendency is known as the “endowment effect,” the idea that people ascribe more value to things merely because they own them. To mitigate that human tendency, Greene recommends setting up auto balancing as a form of “guaranteed preservation” to lock in profits.

When an investment is no longer serving its purpose, that can be a signal it’s time to sell.”

— Mike Greene, Senior Vice President of Financial Planning, Ameriprise Financial

Is this investment helping me achieve my goals?

When buying a stock or bond, you’re usually looking for that growth or income appropriate to your risk tolerance. Ideally, you are also keeping an eye on diversity and securities that represent a particular investing method, segment of the market or area of the world.

The same criteria apply when you’re considering selling. An investment may no longer be performing the way it should to achieve your goals. A declining stock may no longer be delivering returns. Or a mutual fund may have drifted from its original investing style. “When an investment is no longer serving its purpose, that can be a signal it’s time to sell,” Greene says.

Alternatively, selling securities may make sense as your own goals shift. For example, you may be nearing retirement and want to start moving toward more income-producing investments. “There may be growth-oriented securities in a portfolio that no longer fit with what you’re trying to achieve,” Greene says.

Check in with your advisor

Your advisor can help evaluate whether an investment is still behaving the way it needs to in order to meet your goals.

Financial adviser Joanne Reilly, CFP ® , CDFA™, APMA ® (Joanne Reilly and Associates) is a Certified Financial Planner with more than 30+ years of successful experience helping her clients to build exciting futures as well as weather unexpected circumstances. In addition to holding the CFP designation, she also holds the CDFA (Certified Divorce Financial Analyst designation) as well as the APMA (Accredited Portfolio Management Advisor) designation.

Joanne, affiliated with Ameriprise and based in Boston, MA, is licensed to practice in multiple states throughout the country (N, S, E, W, as well as the mid-section). A graduate of Smith College, her previous positions included Bank of America (Senior Vice President, Investments and Insurance).

As an After-Fiftier, she loves Boston – but also enjoys travel, time with friends and family, tennis, music and the fine arts. She also makes time for an important priority in her life: The Haven Project. The Haven Project is a growing non-profit organization assisting the needs of homeless young adults on the north shore of Boston. Their mission? EQUIP and EMPOWER the growing population of unaccompanied and at-risk young adults ages 17-24 in the geographical area with the skills and support they need to achieve their life’s purpose.

Visit Joanne on her website at Joanne Reilly and Associates, on Facebook and on Linkedin.

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