Should I Sell My Stocks Now? Ask These 6 Questions First.

0:00 From 2006 for 2025, $10,000 left alone in the S&P 500 grew to $80,619 according to a study from JP Morgan. Missing the 10 best days left $35,866. That is a risk of selling just because you were scared, but needing the money soon is a different reason to sell. Picture Dave, our financial investor, leaving the grocery checkout because the bill looks expensive, then coming back after the prices rise. He does the same thing with stocks except his shopping cart is his retirement account.

0:27 Is Blake and I'm a CPA that explains investing in plain English. So you don't learn it in the expensive way like Wojak. And today on 9-to-5 Investing, we're talking about when selling stocks actually makes sense. Now first of all, the price on your screen cannot tell you when you need the money. That is why this decision starts with your life. Even if the market has other plans. The urge to sell shows up in one of two moods and the first is fear where everything is red and the guy who is sure it all goes to zero suddenly sounds like the smartest person in the room.

0:56 The second mood is the opposite where everything is up. You feel like the kid screenshots every green day and you want to lock in that gain before it disappears. Now both can feel like a good plan, but if the reason is simply the prices will reverse tomorrow, you are making a prediction about what happens next. And first of all, they try and predict the stock market. That is a total waste of time. No one can predict the stock market. So why is that bet so hard to win?

1:18 Well, in that same study, six of the 10 best days happened within two weeks of the 10 worst days. Think about it. The days you most want to be out and the days that you most need to be in sit right next to each other. So whoever sells a terrible day is often gone for the great day that follows. And that leads to the part nobody thinks about with their thumb over the button, which is that getting out is only half of the trade. Sell no, hold no, sell hold, sell hold.

1:47 To come out ahead, you have to be right two times because you have to sell before the drop and buy back in before the recovery while everything still looks terrible. So Dave sells on the bad day, waits until it feels safe, and buys back higher. The groceries did not get cheaper while he was standing in the parking lot. Morningstar's 2026 Mind the Gap study looked at the 10 years ended December 31st, 2025. US stock funds and ETFs returned 9.9% annually, while the average dollar invested earned 8.7%.

2:14 That 1.2% gap reflects the timing and size of money moving in and out. Some flows pay real bills, so we cannot call all of that difference panic trading. The gap was about 12% of the fund's annual return, which is enough to matter. Plus, it's the question of a trade driven by emotion, not blame every investor who needed cash. And even perfect timing has a cost, which is taxes. In a regular taxable account in the US, selling a winner creates a capital gain.

2:37 And if you held it for 1 year or less, the IRS taxes that short-term gain as ordinary income, the same as your paycheck. Hold it for more than 1 year, and it is a long-term gain, which for most people is taxed at lower rates. So, the same sale can cost a very different amount depending on the calendar. Inside a 401k or an IRA, an ordinary investment sale does not create a current capital gains tax bill. Withdrawals follow separate rules. In a taxable account, check the actual gain and available losses before assuming what you would owe.

3:02 So, if fear is a bad reason, and a gain is a bad reason, should you just never sell? No. And I think this is where a lot of the buy and hold advice just gets lazy. We all know the boomer who has never sold a single share in his life and is proud of it. And with a broad index fund, that has mostly worked out for him. But, the individual stock record is rougher. JP Morgan studied Russell 3000 stocks from 1980 through 2014, and found roughly 40% suffered a decline of at least 70% from their peak with minimal recovery.

3:28 That is about four out of every 10 in that historical sample. Now, that does not mean that four out of 10 of your individual stock picks are going to fail. But, the takeaway is holding a broken business is not going to fix it, no matter how long you're holding it. Never selling can also hurt right before you need the money. And Schwab has a hypothetical with two retirees who each start with $1 million and take out 50,000 a year, adjusted for inflation.

3:52 Both get the same two bad years, down 15% each, but the retiree who gets them first runs out of money in roughly 18 years, and the retiree who gets them in years 10 and 11 still has nearly 400k left. Same bad years, different order, very different outcome in that hypothetical. That gives someone approaching withdrawals for a reason to review stock exposure and cash reserves without pretending there is one right mix for everyone. So, selling is not the problem.

4:16 And these questions will help you make a logical, well-thought-out decision rather than just your emotions and fun making that decision. Question one is, do you need this money in the next few years? Dave has a down payment due soon, and the seller will not extend the deadline because the market had a bad Tuesday. Question two is, has your mix drifted? Say you decided on 80% stocks and 20% bonds, and a long run-up has quietly turned that into 90% and 10%.

4:38 Selling enough stock to return to the chosen 80% is called rebalancing. New contributions can sometimes restore the mix without a sale, so compare that option and any taxes before placing the trade. Question number three is, is the reason that you bought the stock still true? If you bought a company for its growth or its dividend or the people running it, and that reason is gone, that is a real reason to sell, but a lower price all by itself is not.

5:01 Question number four is, do you have too much in one stock? Thinner calls this concentration risk, and it can sneak up on you because it usually happens when a stock you own does really well. Trimming a stock is not disloyal. I think a lot of times people can become emotionally attached. They can become married to a stock that has done really well for them, but trimming really can limit how much one company can hurt in your overall investment or retirement plan, your overall portfolio.

5:22 Question five is, can a loss do some of the work for you at tax time? Selling an investment that is down and using that loss to offset your gains is called tax loss harvesting. The catch is buying the same or substantially identical securities within 30 days before or after the sale. See, two completely different funds. [snorts] Sweetie, it's the same stocks. That is called a wash sale, and the loss is generally deferred rather than deductible now.

5:46 Replacement purchases in an IRA can make the loss permanent. And question six is the most honest question on the list. Can you actually sleep? If a drop has you checking the app at 3:00 in the morning, you probably took more risk than you can live with. But the fix is not to dump everything you own on the worst day. The fix is to pick a calmer mix once on a boring day, write it down, and leave it alone. And the key organ in your body in the stock market is your stomach.

6:11 It's not the brain. Compare that with the Chad of investing. Chad set up his mix years ago, has not logged in for months, and is out on the porch with his wife while everyone else is refreshing that. Now, Chad did not predict the next market move. He just chose a mix of investments that he felt like he could live with, that he could be at peace with, to where he didn't need to be refreshing the quotes on his Robinhood app all day, every day. Now, yes to one of those six questions is a reason to investigate, not an automatic order to sell.

6:36 Decide how much needs to change, what it costs, and what happens to the money afterwards. But if the only reason that you're selling is because prices are down, prices are up, or everyone around you is chanting the same thing, you still need a reason connected to your own plan. There is a limit to what these studies can tell you. They describe history, not a promise for the future. Missing the worst days would have helped, too. The best days chart does not prove every sale is wrong.

6:59 Single companies do go to zero, and I do not know your taxes, your age, or your bills, so treat this as a checklist to think with and not as personal financial advice. Which question made you stop and think about your behavior, your emotions, whenever the stock market is crashing in particular. Let me know in the comments, especially if it changed your mind about selling. Dave can finally leave the checkout without abandoning his retirement plan.

7:19 The down payment gets its own safer home, and the long-term money gets a decision he wrote down before prices started shouting. Before you press sell, consider writing the reason for selling down. If the reason is changing every time that you're refreshing your app, then maybe your mindset needs more work than your portfolio. Just a thought. Consider giving your thumb a better job than hitting that sell button. Check out this video right here.