15 Things To Consider Before Selling Your Stock

These 15 tips could save you from a bad financial decision.

stock market quotes
Updated June 8, 2024
Fact checked

We receive compensation from the products and services mentioned in this story, but the opinions are the author's own. Compensation may impact where offers appear. We have not included all available products or offers. Learn more about how we make money and our editorial policies.

Selling stock is a significant financial decision that should not be taken lightly. Whether you're looking to cash in on gains, cut losses, or reallocate your portfolio, several critical factors must be considered before making the move.

Here are 15 questions you should ask yourself to ensure that selling your stock is the right way to manage your money.

Featured partner offer

4.2

Robinhood Benefits

  • Earn more interest on your uninvested cash with 5.00% APY (as of April 12, 2024)
  • Get up to $50K of your deposits instantly, so you can jump on investment opportunities faster
  • Borrow money to increase your buying power with margin investing at 8% (as of Nov. 15, 2023) APY for Gold members
Join Robinhood Gold here

Do you have a purpose for the money you’ll receive?

Allistair/peopleimages.com/Adobe going through paperwork at home

Before selling your stock, it's essential to have a clear plan for how you'll use the proceeds. Are you reinvesting in other stocks, paying off debt, or funding a major purchase?

Knowing your goal can help you determine if selling is the best option for your financial situation. This clarity will also help you avoid the temptation to spend the money impulsively.

Want to learn how to build wealth like the 1%? Sign up for Worthy to get ideas and advice delivered to your inbox.

Have the business fundamentals changed?

alfa27/Adobe team discussing ideas in conference room while sitting at table

Evaluate whether the core fundamentals of the business have changed since you bought the stock. If the company is facing declining revenues, increasing debt, or losing market share, it might be a sign that it's time to sell.

However, if the fundamentals remain strong, you might want to reconsider. A thorough analysis can prevent you from making a hasty decision based on short-term market fluctuations.

Are you ready for the capital gains taxes from selling?

Kiattisak/Adobe coin stack financial graph chart

Capital gains taxes can significantly reduce the profit you make from selling your stock. Consider the tax implications of your sale, including how long you've held the stock and your current tax bracket.

Planning for taxes can help you avoid unexpected costs. It may be worthwhile to consult a tax professional to understand how to minimize your tax burden.

Get a personalized financial plan to reach your goals faster

73% of Americans rank finances as their chief stress in life, according to a recent study.1 If you’re part of that 73%, J.P. Morgan Personal Advisors could help ease that stress.

Schedule your free one-on-one financial planning session with J.P. Morgan Personal Advisors,2 and you’ll get access to a team of fiduciary advisors who will create a personalized financial plan catered to your lifestyle and financial goals.

Working with an advisor may sound scary, but J.P. Morgan’s advisors are fiduciaries, so you can be confident that any advisor you work with has your best interest at heart.

Book your free financial planning session here

Has your outlook on the company changed?

boonchok/Adobe business people are meeting to analyze data for marketing plan

Reflect on whether your long-term outlook on the company has shifted. If you no longer believe in the company's growth potential or management, it might be time to sell.

Conversely, if you still have confidence in the company, holding onto the stock could be beneficial. Staying updated on company news and performance can inform your decision.

Is the stock underperforming the broad market?

pookpiik/Adobe candle stick graph chart

Compare your stock's performance to broader market indices like the S&P 500. If your stock consistently underperforms, it might be worth considering a sale.

However, short-term underperformance shouldn't necessarily trigger a sale if you believe in the stock's long-term potential. Assessing the reasons for underperformance can provide deeper insights.

Are market conditions favorable?

joyfotoliakid/Adobe stock market trading

Assess current market conditions and trends before selling your stock. A volatile or bearish market might not be the best time to sell, as prices could be temporarily depressed.

Waiting for more favorable conditions could help you maximize your return. Monitoring economic indicators can also guide your timing.

Do you need to rebalance your portfolio?

Jeff Bergen/peopleimages.com/Adobe hands and tablet in office

Periodically rebalancing your portfolio is essential for maintaining your desired asset allocation and risk tolerance. If your stock holdings have grown disproportionately large, selling some shares can help you rebalance and reduce risk.

Regular reviews of your portfolio can ensure it aligns with your financial goals and risk appetite.

Are you acting on emotion rather than analysis?

Freedomz/Adobe business team investment working with computer

It's easy to let emotions drive investment decisions, especially during market fluctuations. Ensure your decision to sell is based on sound analysis and rational thinking, not fear or greed. 

Maintaining a disciplined investment approach can help mitigate the influence of emotions.

Is there a better investment opportunity?

itchaznong/Adobe analyzing technical price

Consider if there are better investment opportunities available. If you believe another stock or asset class offers more significant potential returns, it might be wise to sell your current stock to free up capital for new investments. 

Diversifying your investments can also enhance your portfolio's overall performance.

Earn up to a $300 bonus and grow your money with up to 4.60% APY

This powerful combination checking + savings account from SoFi allows you to earn up to a $300 bonus with direct deposit and grow your money with up to 4.60% APY.3

This is one of the top accounts we’ve seen, and offers like this can be rare. You work hard, and now it’s time to make your money work for you — with SoFi, you can grow your money with hardly any effort!

SoFi has no account or overdraft fees and additional FDIC insurance up to $2 million on deposits is available through a seamless network of participating banks.4 Plus, you can receive your paycheck up to 2 days early.5

How to earn up to $300: Sign up and make a direct deposit within the first 25 calendar days of the promotional period, then collect a $300 cash bonus with a direct deposit of $5,000 or more.

Open your SoFi account and set up direct deposit

What is the stock's current valuation?

kamiphotos/Adobe putting a coin on a pile of coins

Analyze the stock's current valuation to determine if it's overvalued or undervalued. High valuations might indicate that it's a good time to sell, while undervalued stocks could suggest holding on for potential future gains. 

Be sure to use valuation metrics to provide a clearer picture.

Have you considered the transaction costs?

Prostock-studio/Adobe young man calculating taxes using calculator

Selling stock could include transaction costs, including brokerage fees and commissions. Ensure these costs don't significantly eat into your profits. Sometimes, the costs might outweigh the benefits of selling.

Comparing fees across different brokerage platforms can help you find the most cost-effective option.

What is your investment time horizon?

peopleimages.com/Adobe lawyer with paperwork

Your time horizon plays a crucial role in the decision to sell. If you have a long-term investment perspective, temporary dips in stock price might not be a concern.

Conversely, if you need the money in the near term, selling might be more appropriate. Aligning your investment strategy with your financial timeline is crucial.

Are you diversifying your investments?

crizzystudio/Adobe business brain storm meeting presentation

Diversification is key to managing risk in your investment portfolio. If a single stock makes up a large portion of your portfolio, selling some shares can help you diversify and reduce exposure to a single company's performance. 

Spreading investments across different sectors and asset classes can further reduce risk.

How will selling affect your overall financial plan?

fizkes/Adobe Africa American woman reviewing budget

Consider how selling your stock fits into your broader financial plan. Will it help you achieve your financial goals, such as retirement, buying a home, or funding education? Ensure the decision aligns with your long-term objectives. 

Regularly updating your financial plan can help keep your investments on track.

Have you consulted with a financial advisor?

fizkes/Adobe analyzing mortgage loan

Consulting with a financial advisor can provide valuable insights and help you make informed decisions. 

An advisor can offer an objective perspective, help you understand the implications of selling, and ensure your decision aligns with your overall financial strategy. Professional guidance can also help you navigate complex financial scenarios.

Bottom line

joyfotoliakid/Adobe discussing and analysis graph stock market trading

Before you decide to sell your stock, it's crucial to ask yourself these 15 questions to ensure you're making a well-informed decision. 

By considering the purpose of the funds, market conditions, tax implications, and how the sale fits into your overall financial plan, you can avoid common pitfalls and make the most of your wealth-building moves.

4.2

Robinhood Benefits

  • Earn more interest on your uninvested cash with 5.00% APY (as of April 12, 2024)
  • Get up to $50K of your deposits instantly, so you can jump on investment opportunities faster
  • Borrow money to increase your buying power with margin investing at 8% (as of Nov. 15, 2023) APY for Gold members
Join Robinhood Gold here

Author Details

Adam Palasciano

Adam Palasciano is a personal finance-obsessed and money-savvy individual who loves to hash out content on all things saving money. He specializes in writing millennial-friendly personal finance content, covering topics ranging from trending financial news, debt, credit cards, cryptocurrency, and more.