MARMAC

There is no harder question when it comes to the stock market. And there’s no single correct answer, because the market never stops going up and down. To answer the question of when to sell, don’t worry about what the market is doing. As always, just keep in touch with your inner voice and your time frame.
The answer will vary, depending on your individual circumstances. If you’re very lucky, you may never need to use this money or need the income it could generate for your retirement. If that happens to be the case, then the answer will be never. Let your beneficiaries inherit it. Not only will this money continue to grow tremendously, but no one will have to pay income taxes on the gains when you leave it to them. This is because when your beneficiaries inherit something from you, it’s valued at a cost basis of what it was worth the day they inherited it. So if you bought one thousand shares of duck feathers stock at $10 a share years ago, and over the years the stock splits and the price rises so that you now own eight thousand shares at $40, this means that your $10,000 investment is now worth $320,000. If you sell it, you will owe capital gains taxes on
$310,000, the difference between what you bought and sold it for. Now let’s assume that instead of selling it, you left it to your beneficiaries; because they inherited it and didn’t buy it, their cost basis is what the stock was worth when you died:
$320,000. If they then sold it for $320,000, they would not owe one penny of capital gains taxes.
In all likelihood, however, you’re counting on this money for retirement. This means you will one day want or need to switch some or all of your money from growth-oriented investments to an income-generating investment, such as Treasury notes or bills. In any case, you will need to keep a careful watch on that ten-year time horizon.
Let’s say that you have had your money diversified among several mutual funds for nine years already, and you know you won’t need it for another ten years, if then. As long as those funds are performing as well as or better than other funds that are similar to it, just leave it where it is.
Now let’s say you’ve had your money diversified among several mutual funds for seven years, but this time you know you will probably retire in about three years. At that time you will need this money to start generating income so you can begin to live off the interest that the principal will generate. You will have to make a change. With your eye on your timeline, it is time to start reevaluating right now. Let’s say, too, that you had a great run in the market over these seven years, and you’ve averaged about 15 percent a year on your money.
What do you do? It’s terrific that you’ve done well, hut don’t try to outsmart the market. You do not have ten years ahead of you in which you can leave your money just to sit there. Take your profits now.
It may turn out that the market suffers a setback, so that if you had ignored your nervousness, you would have been left back at square one. Or the market might skyrocket after you withdraw your money. Who cares? You have made your money. You have listened to your inner voice. You are far better off selling and ceasing to worry than you are letting your fear drain you and make you feel powerless. This is the money you intend to live on for the rest of your life, and you must trust yourself more than you trust others about where to keep the money safe that will keep you safe.