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Putting all of your eggs in one basket is never a good idea when it comes to investing, especially with your nest egg.In the event that you're thinking about selling stock that you received as part of an annual bonus, you may be out of luck.Most successful investors agree that consistency is essential, so revisit your original reason for buying the stock and determine whether or not it's really time to sell.Every investor has an unique approach to wealth management and is comfortable with different price drops.Legendary investor Peter Lynch said it best: "In stocks, as in romance, ease of divorce is not a sound basis for commitment." A clear majority of investors agree that stocks provide the highest average annual return of most common investments, as long as you're willing to hold them for a long period of time (from 1964–2014, U. Depending on how long ago you acquired the shares, you may not even remember why you bought that stock in the first place. Here are 10 useful questions to ask yourself before you sell a stock or fund. However, there are times that it is indeed worthwhile to bid farewell to a stock.If you call yourself a student of value investing (meaning that you measure the fair value of a stock based on its future earnings power), and you already want to liquidate your holdings after just three months, you're not being consistent with your original investment objective.
Depending on the sector of your stock, other ETFs or indices may be more appropriate.As mentioned earlier, the key is to be consistent and avoid eliminating your positions due to emotions. Follow the advice of former Fed Chairman Alan Greenspan: "The market pays a premium to those willing to endure the angst of watching their net worth fluctuate beyond what Wall Streeters call the 'sleeping point.'" (See also: 3 Pearls of Financial Wisdom From Alan Greenspan) Learning that the price of your stock dropped 3% may make you nervous, but finding out that its benchmark dropped 6% over the same period puts things in perspective.Just like having an investment strategy and determining your risk tolerance, establishing a benchmark is essential to evaluate the performance of any investment.For mutual funds, consider reviewing the Lipper Indexes of funds with a similar investment style. It's one thing if that your stock represents 2% of your entire portfolio, and quite another if it's 60% of your portfolio.
If you did your due diligence, you selected a variety of investments so that the positive performance of some investments neutralizes the negative performance of other investments.For example, your employer could have awarded 250 restricted stock units that vest over time, such as 50 units every year for the next five years.