When you Invest at the Bottom when do you Sell

When you Invest at the Bottom, When do you sell

We’ve all heard the famous saying, “Buy Low, Sell High”. But what does that really mean? What is high enough? Deciding when to take your profit and get out of an investment is not always an easy decision.

One reason you may want to get out of an investment would be to invest in something else. If you have a new opportunity for investment, you may choose to take your profit and put the money somewhere else. Your tolerance for risk may change over time, meaning that you would like to take your current investment and put it in something that is either higher or lower risk.

Diversification would be another reason to move out of a current investment. If you decide that you have too much of your money in one type of investment, you may want to liquidate your current investment and put the money somewhere else. Diversification is a key to building a well rounded investment portfolio, so you always want to make sure your money is spread around to different areas. For example, you may have a large portion of your money in computer stocks. Even if they are making a profit, you may want to consider selling some and diversifying to other industries.

You may choose to take your profits if you need the money for something not investment related. We invest so that our money grows over time. When we build up enough of it, it may be time to spend it on something that isn’t strictly an investment, but is needed or wanted. If you or your child is going to school, you may need the money that was in your previous investment. You may need a new car to get to work, or simply a vacation to get away for a while.

If the market changes, you may need to get your money out of an investment, despite currently being “ahead”. All markets change over time. In the late 90’s, the big investment hype was the “dot com”internet industry. People were speculating on many new internet start-up companies and making lots of money in the short term. Of course, these gains did not last and within a few years, people were getting their money (what was left of it) out of the dot com stocks. This type of thing happens in many industries all the time. What is a good investment today, may not be tomorrow.

Any good investor reviews his or her investments periodically to be sure that they are performing up to expectations. If they aren’t, selling is a good idea, even if you have made a profit so far. You could earn more if you are “under-performing”.

Taking your profit from an investment is sometimes a good idea. Just because you have made money so far does not mean that you are going to continue to do so in the future. Don’t be afraid to sell your investments if you feel the need to use the money for something else, be it another investment, or just for fun.