When It's Time to Cash Out of the Stock Market

When It’s Time to Cash Out of the Stock Market

May 28, 2018

The stock market has had some hiccups over the last six months or so, but in general the last several years have seen some significant growth, with the Dow Jones industrial average, the Standard & Poor’s 500 index and the Nasdaq all reaching some record marks. For many people who have invested in IRAs, mutual funds and 401(k)s, they experienced some great returns over the last several years.

However, inevitably, rising markets will plateau and fall down eventually. This means it is extremely important for investors to know how to protect their gains, manage the risk associated with their accounts and make sure they are generally protected against potential crashes moving forward.

Here are some tips from gold dealers in Scottsdale, AZ that will help you figure out when it’s time to cash out of the stock market.

Know your portfolio’s stress limits

Any time stocks reach record high marks, investors tend to get a false sense of security. It’s easy to become detached from just how much a crash would impact you both financially and emotionally. Therefore, to maintain a sense of realism and to keep a level head, it’s important to be able to envision how you would feel if the market suddenly tanked, and how your portfolio would be affected. You should always have a plan for worst-case scenarios, even when things are going great.

How, for example, would you be affected if there was a 20 percent drop in the Dow? If you had $150,000 invested in your retirement account, that’s a loss of $30,000—that’s huge. It’s important to know how your portfolio would be affected so you know the kinds of strategies you need to take to minimize your risk.

Minimize your risk

Stocks have been generally rising in value for most of the last nine and a half years. In 2017, the Dow rose by 17.8 percent. Again, while there have been some fluctuations in the first half of 2018, the market has still generally been a net positive for investors.

Depending on how long you’ve been in the market, you might actually have too much invested in stocks thanks to the growth you’ve experienced. The question then becomes what your asset allocation should ideally look like. If you initially built a portfolio with 70 percent stocks and 30 percent bonds, you probably have about 80 percent of your cash tied up in stocks, which means you suddenly have a much greater risk. In this situation, it’s beneficial to sell off stocks and invest that money in bonds to get back to your initial asset division.

Keep a level head

Be smart about what you do with your money. You don’t always need to push for every penny of profit you can get. If you’re saving for a retirement that won’t happen for at least another 20 or 30 years, you shouldn’t even worry about what the market is doing in the short term, as there will be plenty of time to recoup any losses that occur. If pullback does occur in that time, you’ll be able to buy more shares at lower prices.

For more information, contact our gold dealers in Scottsdale, AZ.

- by Steve Hunt

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