'When do I sell my stocks?' Ignore the noise and focus on these things.

By Genna Contino

Before you sell, ask whether a rising or falling stock price actually represents a change in the company's business prospects

If market jitters are making you want to sell, ask yourself these three questions first.

I typically write Don't Short Yourself every week with readers in mind who have just begun their financial journeys. So when I received an email from a 76-year-old retired professor and university band director over the summer, I was initially hesitant to respond to his query:

"After 47 years of being a school band director ... I began investing small amounts in stocks that I considered to be financial bulwarks, with steady and increasing dividends that were reinvested. The conundrum is, what is a reasonable answer and strategy to the question of when to sell and put the proceeds in the hands of my financial adviser?" he wrote. His portfolio has grown to about $250,000, he said, with the largest holdings being more than 1,000 shares of Bank of America and 500 shares of Citi.

I can't speak to his specific holdings, and offering personalized investment advice wouldn't be helpful to readers anyway, since everyone's portfolio looks different. But "When do I sell?" is a question almost every investor wrestles with - and, with a tech-sector selloff spooking markets this month, it's a crucial time to distinguish between making an informed decision to sell and panic selling.

Sign up to get Don't Short Yourself in your inbox weekly.

📈 Answer these 3 questions before selling a stock

Panic selling is when an investor sells stocks based on fear or short-term swings rather than a clear analysis of the business behind the stock. Heather Knight, a vice president and national brokerage coach at Fidelity Investments, said the goal isn't to eliminate emotion - we're only human, after all - but rather to not let emotion push you into making a bad decision.

"One belief I've developed over my 20-plus years in the industry is this: Fear is an emotion. Risk is a reality. Discipline is a choice," Knight said.

To keep panic out of your portfolio, run your investments through this simple three-question test before making a move:

1. Has the business actually changed, or just the stock price?💲

When bad news hits or a sector experiences wild swings, markets can see knee-jerk reactions. But just because other investors are selling doesn't mean you need to make an urgent decision.

Instead, ask yourself if the news hurts the company's ability to make money over the long run. (If you own shares of artificial-intelligence companies, MarketWatch columnist Jurica Dujmovic has laid out some questions you should be asking.)

"Volatility may create urgency in price without necessarily creating urgency in the decision," says Alex Coffey, a senior trading strategist at Charles Schwab. "Investors need to consider whether the development materially affects the company's growth, profitability, balance sheet or competitive position. ... If their time horizon or underlying investment thesis hasn't actually changed, that could be a sign that they're reacting to fear, regret, or fear of missing out."

There are a few popular metrics investors can use to help analyze a stock's future performance. One is its price-to-earnings, or P/E, ratio, which gauges how much investors are willing to spend per dollar of the company's expected earnings. Other commonly used ratios are price to sales, which compares a stock's price to the company's revenues, and price to book, which compares a stock's price to the value of the company's equity. Investors can use these to see how a stock measures up compared with shares of other companies in the same industry and with the broader market.

If a solid stock drops simply because the broader sector is swinging lower, panic selling can result in unnecessary losses. If the company is still growing and making money, a short-term drop in price isn't necessarily a signal to run.

For example, investors earlier this year broadly dumped software stocks as they worried that AI would be able to create inexpensive replacements for established software. Shares of cybersecurity companies got swept up in the selling. As a shareholder, if you concluded that cybersecurity businesses wouldn't actually be hurt by cheaper AI tools and resisted the urge to panic sell, you would have seen the price of your shares rise dramatically in the months that followed.

2. Do I believe in this company's potential to grow over the next decade? 🗓?

Pretend you never owned the stock, and you're holding the value of your current position in cash. Would you use that cash to buy shares of the same company? If yes, one bad week probably isn't a reason to sell. If no, that's worth paying attention to, but it has nothing to do with what the stock's price did this week.

Gabriel Shahin, a certified financial planner and founder of Falcon Wealth Planning, asks himself, once a year, a similar question about every stock he owns: "If I were to make a bet, would I want to invest in this company over the next 10 years?"

This test matters most for stocks that have done well for years - like the letter writer's shares in Bank of America, or tech stocks like Nvidia. A company that makes real money year after year is different from a stock that suddenly becomes popular. Shahin said this comes up most with meme stocks, where the buzz can run far ahead of the business. In that case, it may be time to take some money out. "If you want to gamble, great," he said. "But if your $5,000 investment is now $50,000, I heavily recommend you take ... $25,000 to as much as $45,000 and leave the initial $5,000 to let it ride."

3. Has one stock become too big a part of my portfolio?📁

A winning stock can easily become a victim of its own success. If a single stock holding grows too large, it can expose you to overconcentration risk and potentially derail your broader financial goals if that sector hits a prolonged bump.

"The simple answer I give is, once it's more than 10% of your overall liquid investable net worth, you could be taking just unnecessary risk, and you should at least talk to an adviser about it," Shahin said.

Some experts recommend reviewing individual investments before they grow to even 10% of your portfolio. "Investors should periodically review concentrated positions starting at around 5% to make sure their portfolio remains aligned with their goals, risk tolerance and long-term financial plan," Knight said.

Trimming a winner doesn't mean you're giving up on it. If a stock gets to the point where it makes up more than 10% of your portfolio, selling some and putting the money into funds that hold lots of different stocks can help ensure that your portfolio isn't overly reliant on one company. Just keep in mind that if your stock is held in a regular brokerage account, selling it can trigger capital-gains taxes, so it's worth running the numbers or asking a tax professional first.

Fear and your own anxiety can creep into your investing decisions at any time. When the market gets scary, these questions give you something to lean on besides your gut.

For next week's edition of Don't Short Yourself, I want to hear how your circle talks about money. Do you and your friends discuss your savings, debt and salary, or do you just complain about how expensive brunch has gotten and send the same $20 back and forth to each other on Venmo? Let me know by emailing dontshortyourself@marketwatch.com.

🔑 Key money reads

🚗 Young Americans are giving up on car ownership. It's a path to financial freedom for some.

🖥? A dot-com survivor warns retail investors against buying the tech dip: 'You're taking a knife to a gunfight.'

🏦 Here's what investors really need to hear from the Federal Reserve this week.

📃 Everything you need to know about Anthropic's IPO prospectus, which was released Monday.

🛒 Walmart, Best Buy and other stores are now using digital price tags. Critics say they could lead to different prices for different shoppers.

💵 Reader tips

Send your favorite way to save or grow your money to dontshortyourself@marketwatch.com and we might share it with our readers.

👋 About Genna

I'm Genna Contino, an award-winning journalist on MarketWatch's personal-finance team. I'm 28 years old, originally from South Carolina, and currently splitting the rent on an overpriced apartment in New York City with my fiancé. When I'm not writing about my hack for saving hundreds of dollars on airfare, or the four must-have money conversations before moving in with your partner, you can find me reading a celebrity memoir, overanalyzing reality TV, junk journaling, borrowing DVDs from the library or getting thoroughly humbled in an adult ballet class after a 10-year hiatus.

-Genna Contino

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

10-27-26 1000ET