Camille Van Vyve
09 Nov 2022
5 tips to avoid selling your stocks at a bad time
Bad times in the stock market are inevitable. As an investor, you will experience highs and lows. However, as difficult as it may be, it is important to stick to your investment plan and avoid selling your stocks during a downturn. Why? Because market timing is difficult, if not impossible, to do successfully and trying to time the market often results in missing out on the rebound when it happens.
When to liquidate your portfolio?
The market is unbeatable in the long term, that's for sure. But the “term”, that is to say the moment when you materialize your portfolio, is not always chosen; it can impose itself on the investor for multiple more or less foreseeable reasons. Pleasure purchase, unmissable real estate opportunity, professional reorientation, health problem, divorce… even panic attack when the markets start to fall. What if that was the biggest risk in a portfolio, the unexpected liquidation?
1. Remember why you invested in the first place
You made a calculated decision when you decided to invest in a particular stock or mutual fund. Reevaluate your reasons for buying and hold on to your investments as long as those reasons remain valid. For example, if you are investing for retirement, keep that long-term horizon in mind and remember that you can afford temporary setbacks along the way.
2. Don’t sell just because the stock market is down
The stock market goes up and down all the time. Humans are naturally wired to panic when we see our investments going down, but try to resist the urge to sell. As a long-term investor, avoid checking the status of your portfolio too often. And remember: bad times don’t last forever but missing out on the rebound can have lasting effects on your portfolio!
3. Be well insured
To avoid the need for short-term cash, make sure you are well insured. Medically, domestically, or professionally. If you are self-employed, for example, consider taking out guaranteed income insurance that protects you in the event of incapacity.
4. Have an emergency fund set aside
If you need money for unexpected expenses, use your emergency fund instead of selling stocks. An emergency fund should be liquid (i.e., easily converted to cash) and invested in a safe asset, such as a savings account, so you can tap into it when necessary without incurring any losses.
5. Rebalance your portfolio
Rebalancing consists of realigning the weightings of an asset portfolio to bring it back to its target allocation. Imagine that you have a portfolio invested 50% in stocks and 50% in bonds. After five great years on the stock market, your weighting has slipped to 70% stocks, 30% bonds. If the market goes down, you will suffer a significant loss, more than what should correspond to your risk profile. To avoid selling in a fit of panic, regular rebalancing is therefore essential.
Take it easy with easyvest
The passive investment strategy promoted by easyvest is designed for the long term and by definition does not require regular monitoring of one’s portfolio. Invested in a world equity ETF and a euro zone bond ETF, it is diversified to the maximum and offers the return of the market. In addition, we regularly rebalance our clients' portfolios so that they remain in line with their profile. Do you need cash for a specific reason? Our advisors are always available to find the best possible solution. If necessary, the total or partial liquidation of your portfolio can be carried out very quickly.