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Analyzing Risk and Return When Deciding to Withdraw or Stay Invested
Just like when you first decided to invest into a particular security, you must determine the amount of risk you are willing to take balanced with the reward you are expecting. You need to make a decision about how long you are going to stay in the market and how much you can afford to lose over a certain period of time. Much of this has to do with determining your timeline for retirement, when the majority of people begin to cash out their investments. The closer you are to this period of your life, the more conservative you must be with your choices. This can directly impact your decision to perform a stocks withdraw or stay invested in the market. However, it is always important to seek the advice of an investment professional when making major decisions that can impact your financial future.
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Finding the Value of Your Stock
When taking a position with a stocks withdraw or stay invested platform, one must be sure to learn the dynamics of your particular investments. One such method to ensure viability in your portfolio is to find the value of each asset or security. The best way to do this is to use the method of valuation, essentially creating an estimate of what the security is worth. This is routinely done when a company analyzes its finances, giving investors a view of the firm's overall worth including assets, debt and outstanding income. If a stock has a strong value over the course of your financial timeline, it makes sense to stay invested. However, if the outlook over this period is questionable, you most likely should withdraw. Much of this depends again on how much time you are looking at spending in the market.
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Strategize to Find the Best Quality
In order to make sure you do not have to face the challenge of deciding whether to take part in a stock withdraw or stay invested strategy is to make sure you are choosing quality investments. This enables an investor to make sure they are investing only in the most profitable securities, guaranteeing a return with the most minimal amount of risk.
However, sometimes you cannot predict certain causes of a market correction or even a collapse. For example, the sub prime mortgage crisis of the late 2000s was predicted by some analysts, but the majority of investors and consultants were convinced that the housing market would continue to grow exponentially. Likewise, the events of 9/11 could not be predicted by any market analyst. This caused a major market downturn as well, despite the fact that the event had little direct correlation with the economy.
While there are always reasons to to enable a stocks withdraw or stay invested philosophy, you should always take into account the long term effects of your decision. Again, the best way to figure out what viable options for your circumstances is to work with an investor who is fully versed in your financial picture.
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"When's the Right Time to Invest" Motley Fool: http://www.fool.com/investing/beginning/whens-the-right-time-to-invest.aspx
"Shoul I Pull Out of the Market When the Going Gets Tough?" Wi$eUp: http://wiseupwomen.tamu.edu/03-resource-center/expert-q-a-archive.php?q=107