Is it best to never sell or to only sell when it's absolutely necessary during my entire index fund investment career? (2024)

I'm investing in two index funds through QDII, one aims to proximate the S&P 500 index, and another NASDAQ 100. I have doubts about whether to buy and hold all my shares in those indexes or to sell some of them in good times. I'm aware that I probably will have no other choice but to sell when I need the money fast from the investment.

Can someone experienced enough to guide me on how I should decide on the matter? Are there other factors involved in making the optimal decision?

Edited on 11/19/2023.

Looking at all these overwhelming answers to my basic question, I'm incredibly grateful. After carefully reading through all the replies, I now think I have a much better idea about what I should do on the matter.

THANK YOU ALL!

Invest for the long term, as time in the market is the most important element in getting investment returns. With stocks, you should be prepared to wait a few decades before spending the money and/or spend it mostly in retirement. The idea of selling in good times, i.e. timing the market, is a fallacy. It is not something you can do reliably except by dumb luck. It can easily lead to mistakes and losing money.

If you need some of this money short term, that amount should be in something less volatile such as bonds or a bank account.

It sounds like you are in another country than the United States, so your local tax and investing needs may vary. For example, depending on where you live, you may have concerns about inflation, taxation, or even government intervention that are not aligned with what is going on in the US.

An idea might be, if the equity's worth buying today then why would you sell it? So you wouldn't sell it unless there was a compelling reason.

That compelling reason could be there's a better investment opportunity for the use of those funds or you're strapped for cash. Or maybe you look to do some tax-loss harvesting. Or perhaps there's bad news and you want out.

Frequent trading, to sell to realize profits or minimize losses, then buy something and sell again, and so on, is a way to also get your assets cut by a thousand slashes as taxes and possibly trading commissions nibble away at the pile with every transaction.

We sold some when we bought our house (no mortgage, long story). As we still have income, we don’t sell and only “rebalance” with new funds.

I expect that we might sell some during retirement, but hope to have enough other income (SS, pensions, dividends) to not need to.

steadyosmosis wrote: ↑Thu Nov 16, 2023 8:35 amLook at the price of SP500 on the day you were born.
That should help you answer the question.

$177.35.

Today we're at $4,500.

Algamish wrote: ↑Thu Nov 16, 2023 3:36 amI'm aware that I probably will have no other choice but to sell when I really need the money fast from the investment.

Just to clarify the problem, I'll assume that you failed to include the fact that you already have a usually adequate amount of money in an emergency fund.

My AA is approximately 55/40/5. The 5 is in a taxable MM account. That amount of money came in handy when I had to fix a cash flow problem/mistake I made earlier this month. (I have been known to make a few doozies of mistakes from time to time.) Cut out the no other choice but to sell option, this time.

Welcome!

The short, overly simple answer is that you should sell when you need the money. But there are obviously exceptions , some of which include:

— tax loss harvesting (or less commonly, tax gain harvesting)
— rebalancing or re-allocation
— divesting from a security that no longer meets your needs to buy a more appropriate one

I’ve done all of those in the last year. But, I think you’re talking about timing the market. That’s not a good reason to sell.

If you invest your retirement account money in equity index funds during your accumulation phase, the only reason to sell is to achieve your desired asset allocation. You should forget about good times or bad times because timing the market doesn't work (consistently).
Outsides of retirement accounts, you could sell if you need money for large purchases or for tax purposes.

TravelforFun

What is your reason for investing?

I invested for retirement. I just retired, so I am selling per my retirement plan.