It’s easy to lose your nerve and sell too early. Here are some of the best reasons ever for investors to get rid of their shares.
Investing is often a highly emotional activity that requires time and effort. Hitting the ‘buy’ button is exciting, but it’s the decision to sell that can be clouded by fear and doubt, and for good reason.
There have been plenty of seemingly quite sensible reasons to sell your shares, or even entire portfolios of equities over the years, from nuclear accidents to financial crashes, to earthquakes, pandemic, and war.
We’ve compiled a list of 60 of the best reasons investors have had to sell up since the late 1980s, each on their own a cause for concern and either a possible trigger for a major long-term market sell-off, correction, or even recession.
It quickly becomes clear that whatever the outcome of every single event, it’s never been wrong for investors with a longer-term horizon to hold on to their shares, keep investing and wait for the trouble to pass. Indeed, history shows that markets can and do recover from dramatic falls. Some of the best years can follow some of the worst, so it is worth hanging on in there.
To make the point, we’ve plotted the 60 market, social, economic and political events on a chart for the FTSE 100 on a total return basis, so combining both capital performance and reinvested dividends. Between 1 January 1986 and 31 March 2022, the FTSE 100 Total Return Index rose by over 2,010%.
Global stock markets have demonstrated over decades and across economic cycles that they always bounce back. It might take a while, but they do, and then they establish higher highs.
Investors who sell in response to market-moving events risk selling low and buying high.
This graphic is a great advert for the adage about “Time in the market, not timing the market”.
Market timing refers to buying stocks to make a short-term profit. It is possible to do, or try, but predicting exactly what share prices will do, and when, relies as much on luck as skill. You’ll likely require a solid stop-loss system, charting tools and a lot of research to stand a chance of success, but making this system work consistently is difficult.
You could instead choose time in the market. This takes a lot of the stress and guesswork out of investing, relying instead on the proven ability of stock markets to rise and generate strong average annual returns over time.
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The best thing for investors to do is make sure you are comfortable with your risk profile and have a balanced portfolio. You’ll sell when either the original reason for buying the investment no longer exists, or it has done what you wanted it to do.
By sitting tight for the long term, as the graphic shows, you also benefit from compounding. This is the income you receive from dividends reinvested. The dividends from those new shares can then buy even more shares, and so on.
A good way to mitigate investment risk is to drip feed your money to help smooth out the inevitable bumps in the market. Regular investing – putting away the same amount each month, so that you buy fewer shares when prices are high and more when prices are low - smooths out some of the volatility commonplace in global stock markets.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.