Should I Ever Sell Stocks? 6 Times When It Makes Sense (And 2 Times to Hold On)

Let’s be real – selling stocks is way harder than buying them. I’ve been there sitting at my computer cursor hovering over the “sell” button while my brain fights an internal battle. It’s emotional, it’s confusing, and sometimes it feels like you’re giving up on a relationship.

But here’s the thing: knowing when to sell is just as critical as knowing what to buy. It’s part of a healthy investment strategy, even though nobody really talks about it as much.

So should you ever sell stocks? Absolutely yes – but only at the right times and for the right reasons.

Why Selling Stocks Feels So Darn Hard

Before we dive into when to sell, let’s talk about why it’s so difficult emotionally:

• FOMO (Fear Of Missing Out): What if you sell and then the stock skyrockets the next day? This fear keeps many investors holding way too long.
• Loss aversion: Our brains hate losing more than we enjoy winning. Selling at a loss feels like admitting defeat.
• Emotional attachment: We get attached to stocks that have made us money. It sounds silly, but it’s true!
• Confirmation bias: We tend to look for information that confirms what we want to believe about our investments.

I remember holding onto a tech stock way too long because “it’ll bounce back any day now.” Spoiler alert: it didn’t. Learning when to cut ties is part of growing as an investor.

6 Smart Reasons to Sell Your Stocks

1. The Company Fundamentals Have Changed

This is probably the most important reason to sell. If something significant changes about a company’s outlook or business model, it might be time to reevaluate.

For example:

• New competition threatens their market position
• Management scandals or significant turnover
• Declining revenues or profit margins
• Product failures or recalls
• Mounting debt problems
• Loss of key partnerships

As investing legend Peter Lynch said, “Know what you own and know why you own it.” If the reasons you bought the stock no longer apply that’s a big red flag.

2. You Need to Rebalance Your Portfolio

Over time, some investments perform better than others, which can throw off your target asset allocation. Let’s say you want 60% stocks and 40% bonds, but after a stock market surge, you’re suddenly at 70% stocks.

Rebalancing means selling some stocks to get back to your target allocation This isn’t just about being neat and tidy – it’s about managing risk Periodic rebalancing forces you to sell high and buy low, which is exactly what successful investing requires.

I usually rebalance my portfolio once or twice a year. It feels weird selling winners sometimes, but it’s kept my risk level appropriate.

3. You Need the Cash

Life happens! Sometimes you need money for:

• Down payment on a house
• College tuition
• Emergency expenses
• Retirement income

This is a perfectly valid reason to sell stocks. Ideally, you’d plan these withdrawals during good market periods rather than being forced to sell during downturns, but that’s not always possible.

4. The Stock is Seriously Overvalued

This one’s tricky because determining when a stock is “overvalued” involves judgment. But sometimes, a company’s stock price gets so disconnected from its fundamental value that selling makes sense.

Warning signs of overvaluation:

• Price-to-earnings (P/E) ratio much higher than industry average
• Rapid price increases without corresponding improvements in business performance
• Excessive hype and media attention
• Everyone you know suddenly becoming an “expert” on the stock

Remember the dot-com bubble? Companies with no profits trading at insane valuations? That’s extreme overvaluation.

5. You Made a Mistake

We all make investing mistakes. Maybe you bought without proper research, misunderstood the business, or followed a hot tip from your brother-in-law.

If you realize you’ve made a mistake, the best course is often to sell, take the loss, and move on. Don’t let pride keep you invested in something you no longer believe in.

As one of my investing mentors told me: “Your first loss is usually your smallest loss.”

6. Tax-Loss Harvesting

Sometimes selling at a loss can actually be strategic. Tax-loss harvesting involves selling investments at a loss to offset capital gains elsewhere in your portfolio. This can reduce your tax bill while allowing you to reinvest the proceeds.

Just be aware of the “wash sale” rule – if you sell an investment at a loss and buy the same or a substantially similar investment within 30 days, you can’t claim the loss for tax purposes.

2 Times When You Should Probably Hold On

1. Market Corrections and Bear Markets

When markets drop sharply, panic selling is usually the worst move. As Merrill Lynch notes, “There has never been a good time to be out of the market. If you look at every 15- or 20-year holding period for equities going back to 1979, stocks outperformed cash every single time.”

During market-wide turbulence:

• Focus on your long-term plan
• Remember that volatility is the price we pay for higher returns
• Consider whether anything has fundamentally changed with your investments

If your time horizon is long and your investment thesis remains intact, riding out market storms is typically the wisest course.

2. Temporary Setbacks for Good Companies

Even the best companies face challenges. As Investopedia points out, “Virtually all stocks, even the bluest of the blue chips, experience temporary setbacks and then move back upwards.”

Before selling due to a drop in stock price, ask:

• Is this a temporary problem or a permanent change?
• Does the company have the resources to recover?
• Has the long-term outlook really changed?

Sometimes what looks like a disaster turns out to be a buying opportunity.

A Real-World Decision Framework: Is It Time to Sell?

To make this practical, here’s my personal checklist for deciding whether to sell a stock:

1. Has my investment thesis changed? If my original reasons for buying no longer apply, that’s a strong sell signal.

2. Would I buy this stock today at its current price? If the answer is “no,” I should consider selling.

3. Is this position too large for comfort? Sometimes a winning investment grows to dominate your portfolio, creating concentration risk. Trimming positions can be smart risk management.

4. Am I making an emotional decision? If I’m acting out of fear or greed rather than rational analysis, I try to step back and reevaluate.

5. What are the tax implications? Sometimes it makes sense to delay a sale into a new tax year or to pair gains with losses.

6. Do I have a better use for this money? Opportunity cost matters. If I have a more promising investment opportunity, selling to reallocate might make sense.

Common Mistakes When Selling Stocks

I’ve made plenty of mistakes when it comes to selling (or not selling) stocks. Here are some common ones to avoid:

• Selling winners too early – Taking small profits while missing out on bigger gains
• Holding losers too long – Hoping to “get back to even” instead of accepting the loss
• Trying to time the market – Thinking you can sell at the peak and buy back at the bottom
• Selling based on headlines – Reacting to news rather than analyzing its long-term impact
• Setting arbitrary price targets – Selling just because a stock hit a round number like $100

Final Thoughts: Balance is Everything

The decision to sell stocks isn’t black and white. It’s about balancing different factors and staying true to your investment strategy. Remember:

• If a stock price plunges because of a significant and long-term change in the company’s outlook, that’s a good reason to sell.
• For temporary setbacks in good companies, averaging down (buying more at lower prices) might be a better strategy than selling.
• Your personal circumstances matter – your age, financial goals, and risk tolerance should all factor into selling decisions.

I’ve found that having a written investment plan helps tremendously. When emotions run high, I can refer back to my plan and make more rational decisions.

At the end of the day, selling stocks isn’t a sign of failure – it’s a normal part of successful investing. The key is making thoughtful decisions based on logic rather than emotion.

So should you ever sell stocks? Yep, absolutely – but do it for the right reasons and at the right time.

What selling decisions are you struggling with right now? I’d love to hear about your experiences in the comments below!

Quick Reference: When to Sell vs. When to Hold

Remember, every investor’s situation is unique, and what makes sense for one person might not work for another. Trust your research, stick to your plan, and keep your emotions in check!