When to Give Up on an Investment

by Stacy Francis, CFP®, CDFA

I had an interesting conversation with a client the other day.

I don’t feel good about this certain fund, she told me, in a market like todays.

So let’s sell it, I advised her. Buy something you feel better about – or if you are really worried, leave the money in cash for now.

Oh no, she said, I can’t sell the fund, because it’s down from where I bought it.

I spent the following hour musing over when we should give up on an investment. Here’s what I think. No matter what your reason was for buying the security in the first place (you were bullish on this industry, you share the company’s values, you adore the business model, you like the fund manager’s expertise and performance, etc), if you lose this reason, you need to lose the investment. Every hour every market day, you choose whether you like your investment, or not. If you like it, you buy, or if you already own the security, you hold. If you don’t like it, you don’t buy it, or if you already own it, you sell. It is as simple as that. Holding equals buying, and selling equals not buying. Whether your investment is up or down from where you bought it is irrelevant, as the past has no meaning when it comes to investments. It is all about what the price is now, and what you – or the people you trust for advice – think it is going to be in the future. So be clear over the reasons for your investments, and use them to determine not only when to get in, but also when to get out.

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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.