📌 When Should You Sell Stocks? 7 Smart Strategies for Taking Profits

WHEN TO SELL STOCKS

What are the best strategies for selling stocks? You might ask, “Should I sell my stocks when they double?” Everyone says, “buy and hold,” but nobody ever talks about when to take profits. And what is the 4% rule in retirement investing?

I knew a guy who used to say any time his stock went up 100%, he immediately sold half. I felt like, 100% isn’t that much … why sell? But every investor is different and that was how he went about things.

So, let’s talk about a few options.

Panic Selling During a Recession (Don’t Do It)

Market drops. Every headline SCREAMS recession. You open your portfolio and your stomach turns. You say, “I’m going to sell everything now and buy back later at lower prices!”

Thing is, unless you’re very close to retirement and absolutely need that money soon, panic selling is almost always the wrong move.

Historically, market recovers. It could take months (or years)—but every major crash has eventually been followed by new highs. And the people who sold and waited for things to "feel safe" again? They missed the rebound. Every. Single. Time.

When you panic sell, you realize an actual loss. SO many things can go wrong here. Say you bought a stock at $10, and a decade later it’s $150. It drops to $100 and you sell, realizing a HUGE (potentially taxable) gain. And for what? Do you think it will really drop below $10 again? What if it drops to $80. Is that the lowest? Will you even want to buy back at such a high price compared to your initial investment? 100 shares at $10 = $1,000. 100 shares at $80 = $8,000. So you buy back in, it costs MORE or you end up with fewer shares? Too many what ifs that could go wrong. Or maybe you wait, thinking of course it will go lower (even though it already dropped from $150 to $80) and it never does. In fact, it starts to go back up. You sold, lost your shares and now you have zero. Oops.

The best investors don’t sell out of fear. They stick to their plan. They keep investing. They maybe even buy more. It’s not about being a genius. It’s about being consistent.

Selling At A Price Target

Some investors have a price target in mind when they make an investment. They buy at $50 thinking, this investment feels speculative and risky, there’s a lot of momentum and hype. I don’t know if things will pan out long term for this company, but I think it’s reasonable, based on hype, that this thing could hit $70, then why haven’t you sold it when it hit $90? Is it greed? 

Remember, like my friend who sold half, you never have to sell the entire position. 

Trimming An Overweight Position

As long term investors, our goal might be to accumulate large positions in a company. We might have our favorite stock - the one we add just a little bit more to over time. And over time, that one stock might be disproportionately oversized. 

There is no one size fits all number. Some investors will trim an overweight position when that one stock becomes 10% or greater in their portfolio. Even if it is a high conviction stock, you increase your risk when one company makes up 10-20% or more of your portfolio. 
Warren Buffet famously did this when his position in Apple got too big. It’s just a smart move, even if t’s Apple, to trim it. 

When a company becomes too overweight is personal. You might be ok with 10% or even 15%, but if that stock dropped 40%, would it devastate your portfolio? Is that a risk you’re willing to take?

Slow Growth and Changing Market Conditions 

Say you buy this company in the early 2000s. It’s a massive growth company. Revenue beats over and over and over again. Every analyst loves it. Every year the company sells more and more and more until they hit saturation. Not every company can grow in perpetuity and eventually growth slows. 

If that’s the case and you invested in the company FOR growth, you might opt to go in and trim the position. Maybe there’s a new growth company that appeals to you. 

Poor Management and Declining Fundamentals

Maybe the great CEO, who was a visionary, has retired or gone to another company. Maybe her replacement sucks. Revenue begins to decline, debt mounts, if they offered a dividend, they might now be cutting it. You might decide to eliminate a stock like this from your portfolio entirely, or at least cut it down to a more manageable position if you’re worried about the stock dropping heavily. 

Selling Stocks in Retirement (the 4% Rule) 

Say you’ve consistently invested a set amount every single month for 30ish years. You’re in ETFs, maybe some big growth stocks and dividend stocks, and you have amassed very large positions. We’re talking thousands of shares per investment. And now you’re gearing up for retirement. 

You’ve reallocated a percentage into bonds, CDs, and cash for safety, but you need a set amount every year in retirement to live off of. This is called the 4% rule, and it means you withdraw around 4% per year, adjusted for inflation. You can divide it up amongst all of your investments, you could look at ones that have had massive growth or are a little higher risk. You’ve got options. 

Borrowing Against Your Portfolio (Buy, Borrow, Die)

Or maybe you’re the sorta investor who doesn’t EVER want to sell. Your brokerage might offer something called Collateralized Lending or Pledged Asset Line. You cannot do this with your Roth IRA account, it has to be your individual account, and not all investments qualify. This is also for the super wealthy - so if your portfolio balance is $12,000, sorry buddy, you don’t qualify. 

These loans allow you to borrow against your portfolio, avoiding taxes with very low interest rates.