This is a question that comes up in each of my wealth advisory sessions. Lately, with the stock markets going up, I see this coming up a lot more often than before.
- You need the money for an expense – for example you need money for a planned car upgrade or an unplanned hospitalisation. You have investments giving you great returns – but what to do – you need to sell them and use the money for these expenses.
- Your investment is not expected to do well in the future – You invested few years back and the investment was giving you the planned 20% per annum. But now situation has changed and your believe that in the next 2-3 years, this investment will not give you 20%. A good example is Gold – Gold gave great returns in the period 2008 to 2011 – each year it gave more than 20% per annum. However in 2012, it gave just about 11% returns and in 2013 it gave negative returns ( -14%). And this year too it is not doing well. If your forecast is that Gold will continue to do badly in the future, then it is best to exit gold (if you have not exited it already).
- When you get an even better investment option: You have invested in Asian paints and it is giving you a steady return of 25% per annum and you are happy with it. And then you get a chance to invest in a real estate scheme where the returns are expected to be more than 25%. Then you must exit the investment in Asian paints and move your funds to the real estate scheme. Remember that the real estate scheme may or may not actually give the returns – but at this point of time, you are confident of your forecast.