When should you cash out investments?

Financial needs can also justify selling a stock. If you find yourself in a situation where you urgently require funds or anticipate needing them soon, liquidating some of your investments may be necessary to meet those obligations.

Portfolio rebalancing is another important aspect of investment management that can necessitate selling stocks. Over time, certain assets may outperform others, leading to an imbalance in your portfolio's asset allocation. To maintain your desired risk-return profile, selling some of the overperforming stocks and investing in underrepresented asset classes may be necessary.

Identifying better investment opportunities elsewhere is another compelling reason to sell a stock. As an investor, you are continuously searching for ways to optimize your portfolio's performance. If you come across a promising investment that aligns with your risk tolerance and financial goals, it may be wise to sell some of your existing holdings to allocate funds towards this new opportunity.

Selling a stock can be warranted under various circumstances, and the first scenario is when your investment thesis undergoes a significant shift. This might occur due to a change in the company's fundamentals, industry trends, or your personal financial goals, necessitating a reassessment of your investment strategy.

Another valid reason to sell a stock is if the company becomes the subject of an acquisition. In such cases, shareholders often receive a cash payout or shares in the acquiring company, making it prudent to liquidate your holdings in the target company.