What to ask yourself before selling shares

While it’s true that a lot of thought should be given to when to buy a stock, equal consideration should be given for when to sell. Whatever the reason for maybe selling, it’s important not to let feelings cloud your judgement. Emotion could prevent you from selling your shares and ending up with a loss, or it could see you holding on to your shares unreasonably, in the hope that prices might improve.

So, here are some helpful questions to ask yourself before making a decision.

Have my goals changed?

Think back to why you bought your shares in the first place – if it was to build long-term wealth, have you hit that goal? Maybe you wanted just enough for that house deposit. Is that still the case?

If you have new investment goals, or if you’ve reached your original goals, you may consider selling.

Has the company changed course?

If the company you invested in has changed direction or the core nature of its business then you might think about changing up your investments.

Before you sell it’s important to fully understand the changes the company’s made and how they could impact your goals and investments.

Has the share price nosedived?

The price of your shares might have fallen or there could be a broader market downturn, where many companies on the sharemarket slump. In both of these situations you might want to sell or wait for a recovery.

Remember how long you originally planned to hold the shares and find out whether the company’s long-term prospects have changed. If you’re a CommSec user, we offer our customers access to research such as Goldman Sachs and Morningstar stock recommendations, covering hundreds of stocks.

Is your portfolio balanced?

Before you cut a company from your investments, think about how that could impact the balance of your overall share portfolio. Having a diverse portfolio, where your money is evenly spread across a range of companies, could help reduce your exposure to risk.

You might need to re-balance if one company represents a particularly large slice of your overall investments.

Are you chasing a new opportunity?

Do you want to sell shares so you can buy into another company? We get it, FOMO is real but, before jumping in, think about how this decision could impact your long-term investment strategy.

Get tax advice

Selling shares may have tax implications, so it’s best to ask for tax advice before going ahead.

When you buy shares for one price and sell them for a different price, the difference between the two amounts is your capital gain or capital loss.

If you sell your shares for more than what you paid for them, then you may need to pay capital gains tax. Your capital gain will be added to your assessable income in your tax return that financial year. If you’ve held the shares for more than a year, you can usually get a 50 per cent discount on your capital gain.

How to sell shares

It’s easy to sell shares through the trading menu on the CommSec platform. You’ll need to know the company’s stock code and how many shares you want to sell.

Before the sale goes ahead you’ll be given an indicative order summary showing how much money you could get back.

If you’d like to learn more about investing, head over here.