What to consider before you sell shares

Deciding on the right time to sell shares can be as difficult as knowing when to buy in the first place. Asking yourself some basic questions may help.

 

Have your investment goals changed?

When you bought the shares, you may have had a particular goal in mind, perhaps investing to pay for your children’s education or to build long-term wealth.

If you have new investment goals or your shares have delivered the gains you need to attain your investment goals, the time to sell may have come.

 

Has the company you invested in changed direction?

If the direction of a business or nature of its operations has fundamentally changed, then you might consider selling your shares.

Before selling you should fully understand what has changed about the company and how it might impact your goals and investment strategy.

 

Are you selling because of a downturn?

If market data is showing a stock specific or wider downturn, you might consider selling. But you might also consider waiting for a recovery.

Remember to consider your original investment timeframe and whether the company's long-term prospects have changed.

 

Do you need to rebalance your portfolio?

You may need to rebalance your portfolio because one of your shareholdings may represent an overly large exposure in your portfolio, if it has performed better than others, for example. 

Be sure to consider your overall investment portfolio allocations.

 

What are the tax implications?

Selling shares may result in an assessable capital gain in a particular financial year that will cause an overall increase in your tax bill. You should consider seeking tax advice before proceeding.

 

Have you factored in transaction costs?

You pay brokerage on shares when you buy and when you sell so if you are considering selling because the price of your shares has dropped, transaction costs will add to your overall investment loss.

 

Are you considering new investment opportunities?

Look before you leap into an investment opportunity. Think carefully about how this decision may affect your overall investment strategy or the rest of your portfolio.

 

The information on taxation is of a general nature only and is based on the continuation of present taxation laws, rulings and their interpretation. As individual circumstances differ, you should seek assistance from your taxation adviser.

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