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When to pull your money out of a company’s stocks

POSTED ON MARCH 17, 2023    

Investing in stocks carries much potential volatility, since their value can go up and down quickly. That’s why a sudden price drop might not be a good enough reason for you to pull your money out.


After all, while doing this can prevent further losses, it also makes your paper loss an actual one. Once that happens, you won’t be able to recover the money that you already lost, even if the company’s share price goes back up. On the flip side, this does gives you the opportunity to invest your cash elsewhere.


So, when should you consider pulling your money out of a company’s stocks? Here are 3 situations in which this might actually be a good move:


When the fundamentals have weakened a lot

A company’s fundamentals are its business basics which allow it to operate and make money. Strong fundamentals are needed for an organization to have good health and performance, and so you should check for these before putting your money in a company.


While uncommon, it has happened that a company’s strong fundamentals have weakened a lot in time. This can have many possible causes, but all lead to lower performance or even more serious trouble down the line.


That’s why, if you hold shares of a company whose fundamentals have weakened significantly, pulling your money out is something you can consider.


When you’ve lost faith in the company

Fundamentals aside, there are other aspects of a company’s operations which can affect its performance. For example, the business decisions that it makes can help it grow or lose ground, so these will ultimately affect the value of its stocks.


However, not everything comes from the company itself. There are times that new or modified regulations can help or hinder a certain organization or industry, and your investment will reflect those changes.


There are other reasons for this to happen, but at the end of the day, losing faith in a company’s future prospects is another valid reason to consider pulling your money out.


When your approach has changed

If your stock holdings were chosen with the objective of earning income for you but your approach has changed to a growth strategy (or vice versa), the option to pull your money out wouldn’t automatically be a bad one.


While income and growth aren’t necessarily exclusive goals with stocks or other investments, the shares that you own would have been selected for one or the other. Using them to achieve a different objective would probably be less efficient and less effective.


Honorable mentions

There are some situations in which the decision that is right for you depends on a lot of variables. In such cases, you’ll need to spend some time and effort considering all angles before making your choice.


For example, you might think of pulling your money out of a company’s stocks and moving it to a different investment with a higher potential growth rate.


You’ll need to be very confident that you’ll achieve this superior growth before making the switch, because you’ll be risking ending up with returns that are actually lower than those you had before.


Another situation is a bearish market, or even large-scale economic trouble like a recession or depression. The right move for you will be determined by factors such as your risk comfort level at that time and your time horizon, and so there really is no one-size-fits-all answer.

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