Should I Sell All My Stocks?

There are times to sell a stock and times to hold on to it.

Stocks are best thought of as long-term propositions; and so for the average investor, it would not make sense to sell all of your stocks. Stocks are assets that gain in value over time and that pay out rewards in the form of dividends simply for owning them. There are few circumstances where it would make sense to sell all of your stocks. The long-term history of the stock market makes it unwise to do so.

Long-Term Growth

The value of the overall stock market is directly tied to economic growth. The value of stocks is based on the earnings of the companies they represent. As the economy grows in size, the earnings of the companies in the stock market will likewise rise. For stocks to fail to gain in value over the long term would require zero to negative economic growth over the long term. This is a highly unlikely proposition.

Dividends

Stocks do not simply sit in an investor's portfolio until such a time he chooses to sell them; instead, the stocks regularly pay out dividends, which are a share in the earnings of a company. The money that the investor receives from dividend payments may be used to purchase more stock or for other investments. In this way, the wealth that is kept in stock may grow exponentially: wealth creating even more wealth.

Selling

To say that you should not sell off your entire portfolio is not to say that it might not sometimes make sense to sell some of the stock you own. A wise sale can be a quick way to make a gain in wealth. One method is to look for stocks that you consider undervalued. When the stock then rises to what you consider its fair value, you can sell it for a fast profit.

Diversification

When looking at your entire stock portfolio, it may be wise to make a distinction between those stocks that you intend to keep for the long term and those that you are only holding until they reach a certain value. By diversifying your portfolio in this way, you can both reduce your risks and grow your wealth faster. The money that you make from selling some of your stocks can be used to buy other stocks.

References

• The Motley Fool; 4 Reasons to Sell a Stock; Jeff Fischer; December 2010
• The Motley Fool; 3 Stocks Near 52-Week Highs Worth Selling; Sean Williams; February 2011
• The Motley Fool; One Quality Stock to Sell Today; Todd Wenning; March 2010
• The Motley Fool; Get Smart About Selling Your Stocks; Dan Caplinger; September 2010
• The Motley Fool; Best Stocks for the Long Haul; Rex Moore; April 2011
• "USA Today"; Dividends Make Stocks More Profitable; Matt Krantz; April 2010

Resources

• The Motley Fool: Homepage
• "The Wall Street Journal": Homepage
• Bloomberg Businessweek: Homepage