When should you close your investment?

Olga Miler

Last week my son’s WhatsApp: “Mom, can I send you my Bitcoin for sale?”. He had enough for the price of about 63,000 francs and wanted to take the profit. I think the money will be used for something else, we’ll see what it’s for. I didn’t want to make myself unpopular, so I decided not to ask. The Bitcoins went from the hard wallet to mom, who then sold them and transferred them via Twint.

In investing, people often read and talk about the best time to start (which doesn’t really exist), one-off investments or spread investments to achieve an average price effect, and that a long time horizon makes sense. But when exactly is the right time to get out? Here are some thoughts and ideas that may help you better determine this for yourself and your investments.

Simply put, there are three basic scenarios that could motivate you to exit your investments:

Depending on the reason and purpose, your exit will look different.

Ideally, you sit down Clear objectives from the start of your investment: Is your investment speculative, do you want to make a quick profit or will it build capital in the long term? Do you want to reach a certain amount? Or do you need the money at a certain time, for example for a trip, home ownership or retirement?

All these points will not only help you with entry and strategy, but also give you clear signals for exit.

If you didn’t originally set a goal for yourself when investing, it helps to make this clear to yourself before you potentially quit. why you invested and wondering why you want to get out nowto avoid emotional decisions as much as possible.

If you want to liquidate your investment at a certain time, for example because you need the money or have reached a certain amount, then ideally you will have time to prepare your exit accordingly. Possible points to take into account are:

So-called staggered recordings are often used on the internet and various forums 4% rule recommended. This goes back to the Trinity study and explains this that 4% of the original value can be withdrawn annually for 30 years from a diverse equity portfolio, while the risk of the assets being completely consumed prematurely remains very low.

However, this rule of thumb should be used with great caution; critics and other calculations have shown that the optimal withdrawal rate is lower, at 2.5-3.5%. More details and calculation in this article.

How does your investment compare to similar investments or benchmarks? Compare your returns regularly, for example once a year. If you notice that your investment is consistently underperforming market indices such as the MSCI World, this may be an indication that it is time to reconsider and make a change.

The same applies to the cost comparison as to the return. Once a year, take a look at what your investments have actually cost you and see if you have any opportunities for optimization, as even small percentages can significantly reduce your returns over time.

One of the most common challenges is not to sit with losers or overpriced investments in the hope that they can recover in the future or that returns will offset the excessive costs.

Of course, it is painful to accept a loss not only ‘fictitiously’, but also to actually materialize it, but while waiting you can also incur opportunity costs. To illustrate, while you patiently wait for your investment to recover by, say, 5%, the entire market may have already advanced by 15%. One possibility here is Partial sale, where you reduce the position but do not completely liquidate it. In this way, you reduce your risk of even greater losses if, for example, the share price falls further, you have freed up capital and you still have a chance to limit your current loss if it recovers.

The same principle of partial selling also works if your investment is doing well and you want to dry up your profits. With a partial sale you protect yourself and still have the opportunity to be part of further growth.

There are numerous analysis options, graphs and different rules you can apply. It is important to understand that emotions are one of the main causes of investment mistakes and can move entire markets. If you have set yourself a clear goal, this will help you control your emotions and not be influenced by too much news, as well as fear and greed.

a Emergency fundhaving something to fall back on if the worst happens, helps you avoid unwanted losses because in the event of an emergency you don’t have to sell your investments at a perhaps inopportune time, but you retain the flexibility to plan your exit accordingly.

For anyone who trades stocks regularly, this is a rule that should be followed consistently Stop the loss essential to absorb major losses. Instead of large chart analyses, it helps to look at the companies and sectors to better classify the financial information.

Just like with entry, there is actually no ideal time to exit and this depends on many factors, including the market environment and your risk tolerance. By setting clear goals, reviewing your investments regularly and staying rational, you increase your chances of quitting at the right time for you.

For me, I do it in such a way that I don’t look back to see if I could have done more to irritate myself. The only thing that is certain is that there are always new opportunities and for me the sparrow in the hand is often better than the dove on the roof. How did you sell investments? What experiences and tips do you have?💰