When you withdraw some money from your investment, you’ll notice one immediate effect: the growth that it has been experiencing will be reduced.
It takes money to make money through investing; after all, the more capital you put in, the more you could potentially earn, and the less capital you have, the less you could potentially earn – in peso terms.
Even if you invest the same amount as you withdrew later on, you might not be able to match the overall performance you would have seen if you hadn’t taken the money.
So, when should you consider withdrawing from your investment?
When you have no other choice
More of an act of desperation than anything else, you can think of taking money from your investment when you’re all out of options. This is something that investors can avoid if they make sure that they have an emergency fund set up even before they start to Invest.
In a situation like this, your present needs should truly be more important than achieving your investing goals. Of course, taking some money doesn’t mean that you won’t be able to reach your goals eventually, but taking a chunk off of your capital will require your investments to work harder to keep up with your goals.
If you do this, remember to take only what is absolutely essential. This will help limit the negative impact on your investments, especially you are withdrawing funds prematurely.
You can ‘offset’ the impact by putting the money back as soon as you can afford to, or by increasing your regular investment contribution. It can be difficult to do in one go, but you can always add a bit one payday at a time.
This won’t make up for the period in which the amount wasn’t there, but if you could keep in in longer than originally planned, you might still end up with the right amount of money.
If you’ve reached your investment goal or time horizon
Remember that the reason why you started investing is because you’d like to accomplish goals. You realize this once your investments hit a certain milestone, or if you’ve invested long-enough to reach your intended time horizon.
Whichever comes first, you can certainly consider withdrawing a portion of your investments for you to be able to turn your dreams into reality.
When you reach the time to use the money but find that you don’t actually need all of it, you can withdraw only a portion and keep the rest of it invested. While this will deviate from your strategy, it’s actually a good thing.
Not pulling out the excess money will allow it to keep growing, so you can eventually use it for a different goal. You can also continue adding to it regularly to help it increase even more.
Doing an early partial withdrawal from your investment isn’t recommended. It should be one of your last resorts, and considered only when there are no other options available.
The impact on your goal of withdrawing some money depends on how much you take relative to the investment’s total value. The larger it is, the larger the possible effect, and vice versa.