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When to sell

“When should I consider selling my ETFs?”

One of the services I offer as a financial coach is teaching people about investing, and in particular, how to invest for themselves. The lesson always starts by looking at a chart of the U.S. stock market since 1928. We talk about some of the biggest market downturns in history and how markets recovered over time. The lesson? The stock market is volatile but over the long run it has always gone up. I start with this lesson because as a do-it-yourself investor you need to have the stomach to watch the value of your investments fall without hitting the sell button.

After we discuss asset allocation – how to divvy up the money between cash, bonds and stocks - I explain how to go about finding exchange-traded funds that fit their needs. This makes up their investment strategy: buy ETFs that track broad market indices and that fit their time horizon and risk tolerance and leave them alone.

Often at some point during our conversation, I am asked “When should I sell?” Sometimes this question is about stemming losses if markets decline - shouldn’t I stop the losses before they get worse? Sometimes it’s about re-evaluating whether the chosen ETF is still the right choice - if it went down in value does that mean I picked the wrong investment?

If the money you are investing won’t be needed for many years in the future, and your approach is to invest in ETFs that track the market, then selling shouldn’t even be a question.

You’ve seen the 95-year stock market chart. You know that the stock market goes up and down and up and down. If your investments have a few bad months or even a couple of bad years, you shouldn’t be surprised. You knew this would happen. Why would this ETF that invests in the S&P 500 now not be the right choice? It’s still the right investment for you so why sell it?

You might be thinking “Well, I’ll sell it and stem the losses and buy it back once it starts going up.” Of course this sounds rationale, but it’s nearly impossible to execute properly. No one can time it perfectly. Sometimes when a market declines rapidly, it also bounces back really sharply. If you’ve sold, you’re going to miss the bounce.

The question of when to sell only applies to active investors, those who are making bets on specific stocks, sectors or commodities. If you’re going to try to beat the market with that game, then yes, you will have to try and time it right. However, take my advice: don’t try. It’s really, really hard. Just buy when you have the money, sell when you need it.

My mantra is this: the more decisions and choices you can take out of investing, the better. Humans make mistakes especially with investing. It’s not just about “being smart” – emotions also play a huge role in decision-making. Also, being smart doesn’t help you know when to buy and sell.

The idea of ignoring something that doesn’t seem to be working can be a hard concept to wrap your head around. In other parts of our lives, we take action when something doesn’t seem to be working. When Bell recently increased the cost of my already expensive internet service, I switched to a cheaper provider. When the cat stopped liking his food, I switched to another flavour. When my neighbour shovelled the walk at 6:30am (again), I stole their snow shovel (just kidding, I haven’t actually stolen their shovel - yet). This is sensible. However, when it comes to your ETFs, it doesn’t make sense to switch when it “isn’t working”. Because even if the value went down, it’s still working. It’s just doing what it does.

Maybe it’s a bit like relationships. You choose a partner carefully and thoughtfully. You get to know them and determine whether they are the right fit for you. After careful consideration, you commit to the relationship. You know it’s not always going to be perfect or even easy. There will be ups and downs – guaranteed! But you’re committed and you feel that this person is right for you over the long run so you don’t give up at the first argument…or the second, or the third.

The same could be said for any kind of commitment: your career, learning to play the guitar, improving and maintaining your physical health. You will experience ups and downs with all of these things. But it you’re committed and can see the long-term benefit, you will hopefully stick with it knowing that the easier times will return.

Is there ever a situation when should you consider selling your thoughtfully-chosen ETFs? Yes.

1. If your situation has changed. Although it’s unlikely, there’s a possibility that your time horizon changes. Money that you’d set aside for retirement might be needed sooner.

2. Your tolerance for volatility isn’t what you thought it was. If the decline in your investments has you stressed out and losing sleep, maybe you need a less volatile portfolio that includes more bonds and GICs.

3. You are close to your target date. When you were 30, you had a 35-year time horizon until retirement. Now you’re 65 and retirement is here. It might be appropriate to sell some of your equity ETFs and switch into fixed income ETFs.

4. You need the money. If you’re retiring next year and you need to start drawing on your savings, shifting some money into highly liquid and safe investments makes sense. Go ahead and sell some of your ETFs and hold onto cash.

Remember, just because the value of your investment declines, it doesn’t mean it was a bad choice. It’s what investments do. If you’re properly diversified and have the right allocation to stocks, bonds and cash, just hang tight. It will be ok.


This cartoon has adorned my work space since my first job in 1997. A reminder that I cannot time the market and should just not try.


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