4 Questions to Ask Before Selling in a Volatile Market

A recent MarketWatch article observes, “when the stock market is [as] nerve-wracking as it has been, investors need to make sure that any decisions they make are part of the big plan instead of the result of panic.” It says that “selling is an option,” but an investor should ask the following questions before doing so:


  1. “Does a sale protect my nest egg, or my ego?” – If one sells to protect gains or because one expects a specific downturn, it can be a part of a rational plan and should lead to careful re-allocation. “Pulling money simply to get out of the danger zone is impulsive; that’s the panic-stricken move to avoid.”


  1. “What has changed about the investment?” – “Strategic reasons to sell make sense regardless of market conditions,” but “if you’re selling out of fear, that’s letting market volatility dictate your strategy.”


  1. “How does a change affect my portfolio’s risk profile?” – “If you unload a piece of the portfolio, check how it changes your asset allocation.”


  1. “How am I redeploying the money – now and in the future?” – One “problem with making moves to calm nerves is that people who panic have a tough time getting back into the market” while others “have specific targets they are looking for that will have them back in the market.”