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My Investments are up 30%! Should I sell?


Selling Investments

With the recent attack on Saudi oil production the price of oil temporarily jumped about 20% in value, quite literally over night. This sent many oil producing companies higher the following day with some seeing 10% gains in the short term. Since that time (just a few days ago at the time of writing this) the oil price has settled back down again as Saudi production is returning back to normal levels, but it reminded me of a difficult question, maybe the most difficult question, that many investors ask which is "when do I sell an investment?"

This year the market has seen a great deal of volatility and it has reminded many investors about their experience during the financial crisis. With many experts and media outlets calling for a recession next year (remains to be seen) many investors have become concerned about whether they are going to give back the great returns they have experienced over the last number of years.

Are investors right to be concerned?

Should they make investment decisions based on what their returns have been to date and a prediction that there might be a recession next year? My advice is absolutely not! A great deal of wealth has been destroyed by trying to time market crashes and rebounds. But there are certainly times when you should consider selling so let me give you a quick guide on considerations that should be made before selling:

First and foremost, consider your time horizon for your money as in when do you want/need to spend the money. With longer term goals my advice is to ignore short term fluctuations and focus on the longer-term fundamentals of the company or asset you own. If you have already seen significant gains that's great but there are potentially much greater returns to come as well. If your time horizon is shorter then that's a different story and you will want to ensure that the money you intend to draw on is in assets with lower volatility in their market pricing. The biggest portfolio killer is drawing from assets that have gone down in value.

Does the investment still make sense for your overall portfolio strategy?

If you are a value investor like we are primarily at Endeavour Wealth Management, then you should have an idea as to what the true value of the company is. Has the market valuation achieved what you believe is the intrinsic valuation? If so, then perhaps this money is better served investing in new opportunities going forward.

Alternatively, has the thesis for why you invested in this asset not come to fruition? Has management failed to execute? Is there a change in management or direction? There are many reasons why an investment thesis may not play out as you expected so don't let your bias keep you invested in something that no longer fits your overarching portfolio strategy

Is it time to rebalance your portfolio?

In every long run up in the market there is a majority of investors who allow their asset allocation to go beyond where there own behavioral patterns would dictate it should be. Typically, stock positions become a bigger part of the portfolio and the less volatile assets are a smaller piece. This leaves you susceptible to volatility in the future which you don't wish to experience. Regularly rebalancing your portfolio and selling from profits to buy into assets that have lagged behind can help ensure you are never put in a position where you see greater losses than you are comfortable with.


Consider your tax position. Capital gains tax is the most favorable tax to pay in Canada, but it is still a tax which can be deferred so prior to selling any assets you should always consider what the tax consequences of the sale are. Likewise, you shouldn't be afraid to sell solely on the fact that you will incur a capital gain. If the asset is no longer worth what it is currently trading for then it may drop significantly in value and I can tell you at that point you won't have to worry about paying taxes anymore. Tax needs to be considered always but it also needs to be understood.

Another consideration is if you can offset the tax on gains with tax losses. There is an idea out there that the mark of a smart investor is determined by how they stickhandle in and out of market fluctuations on a daily or monthly basis. This is false! The true mark of a smart investor is how they behave during market downturns and whether they take advantage of the opportunities that arise. Read up on the most successful investors and you will find this to be the case.

Don't allow yourself to be seduced by the flashy story and understand your own behavioral patterns. This is the key to building 'Smart Money'.

- Grant White, CIM, CFP

Grant White is an award-winning Portfolio Manager/Investment Advisor at Endeavour Wealth Management with Industrial Alliance Securities Inc. Together with his partners he provides comprehensive wealth management planning for business owners, professionals and individual families.

This information has been prepared by Grant White who is a Portfolio Manager for Industrial Alliance Securities Inc. (iA Securities) and does not necessarily reflect the opinion of iA Securities. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Portfolio Manager can open accounts only in the provinces in which they are registered.


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