3 Things to Consider Before Cashing Out Stocks

Analyzing stock market report

Investing is all about making the right decisions. You need to know what to invest in, when to invest and when to sell. While those first two decisions are important, the success of your investments ultimately depends on knowing when it’s time to cash out stocks. Sell parts of your portfolio at the right time, and you can enjoy great returns. But sell at the wrong time, and you might incur big losses

If you want to maximize your investments, don’t sell before thinking it through. To know if it’s the right time for cashing out stocks, there are three things you need to consider:

  1. Your Age
  2. Market History
  3. Personal Circumstances

In this post, we break down these three factors. By the end of this article, you’ll be able to sell (or not!) with confidence.

Consider Your Age

Senior man using laptop.

When most people consider cashing out stocks, they think about timing.

They know to buy low and sell high and so they’re pouring over the Dow Jones or the S&P 500, anxiously calling their financial advisor and waiting for just the right moment. They want to time the market perfectly.

But if you’re considering selling off your portfolio, that’s not the timing you need to be focused on. The most important timing is your own— your age and the time you have until retirement.


Here’s why:

  • More time invested means more time for your assets to grow. In general, your returns will increase over time. The longer you can keep from withdrawing your investments, the more money you’ll have to withdraw for retirement.
  • The closer you are to retirement, the less risk you can tolerate. If you won’t be retiring for a while, your portfolio will have plenty of time to recover from any dips in the market. But if you’re closer to retirement, there’s less opportunity for your funds to bounce back and so dips are more serious.
  • Your age determines how soon you’ll need the money from your investments. As you near retirement, you’ll want your assets in a more accessible form. If you’re nearing 65, it might make sense to trade some investments in for more liquid alternatives.

Selling investments may seem urgent — like you have to make a decision right now or else. But by considering your age, you’ll be able to step back and see just how pressing a decision it is.

Main takeaway: focus on your timing, not timing the market.

Question to ask yourself before cashing out stocks: How many years do I have until retirement?

Consider Market History

Looking at stock market history

The worries usually start with a look at the stock market. When the market is volatile, like it has been in the wake of the COVID-19 pandemic, investors start to panic and sell off in a hurry.

The problem is, this approach is short sighted.

The New York Stock Exchange has been around since 1792 and in its 229 year history, it has trended upward. Yes, there have been significant crashes and lows like the Great Depression in the 1930s, the Recession of 2008 or most recently the 2020 COVID-19 downturn. But while one shouldn’t minimize the seriousness of these crashes, it’s important to note that the market has always recovered. For example, though the global market crashed last March, it rebounded quickly and the year closed with record highs.

Wise investing sees this big picture. It’s able to step back from the emotion and recognize that statistically, it is better to stay invested than start cashing out stocks. Again, if you have years until retirement, it’s generally better not to sell. If you are close to retirement, it might make more sense.

But crashes aren’t the only part of the market you should consider. It’s also important to look at highs.

If an investment is performing dramatically better than its peers or its history, the high will likely be short-lived. It may make sense to sell before it returns to normal. 

Main takeaway: base your decisions on long-term trends, not sudden spikes and dips.

Question to ask yourself before cashing out stocks: How do my investments’ current performance compare to their performance over time?

Consider Your Circumstances

Senior man enjoying in the comfort of the living room, going through paperwork and using laptop

Finally, it’s important to look at your personal circumstances. 

Difficult circumstances might push you towards selling. If you’re facing a financial emergency and need the money to pay off a medical bill or other debt, you may need to sell.

But you might also be facing incredibly positive circumstances. Perhaps you’ve reached your investment goals. Maybe you’re financially secure and want to put the money towards something else — like a child’s education or charitable giving.

Whether positive or negative, your circumstances should weigh in on your decision to sell or not. Just be sure that you look at them in light of the bigger picture.

Main takeaway: consider personal circumstances, but don’t let them make decisions for you.

Questions to ask yourself before cashing out stocks: What personal circumstances make me want to sell? What personal circumstances make me not want to sell?

One Bonus Thing to Consider:

Modern senior couple signing housing contract

These 3 considerations should help guide you as you make decisions. But selling off your investments is an important decision and there’s still a lot of nuance to each factor. That’s why there’s one more thing we really think you should consider:

Consider getting wise counsel.

If you really want to make the right decisions, hire a financial advisor. There’s so much emotion and urgency bound up in investing. It’s worth it to have a trusted professional at your side. Financial advisors have the experience and the wisdom to help you sift through every factor and weigh them appropriately. They can bring peace when you feel anxious and bring innovative solutions when you’re not sure what to do.

And best of all, the right financial advisor will help you develop a comprehensive financial plan so you’re not stuck making this decision reactively and on the fly. With that kind of strategy in place, you’ll be able to march towards retirement with joy and confidence.

Book your free consultation with Metanoia Financial