What About Now? Should I Sell My Stocks Now?

It’s understandable that when the stock market experiences a sharp drop like it did this week, the question "Should I sell my stocks now?" starts to creep into your thoughts. Watching your portfolio balance steadily shrink can be unsettling, and the urge to "do something" to stop the bleeding can be powerful.

But before you hit that metaphorical "panic sell button," let's take a deep breath and consider what the actual evidence suggests.

While you might be getting Bill Paxton a la Aliens vibes…

The core message that consistently emerges from market analysis and historical data is that time in the market is far more important than trying to time the market.

And this isn't just a catchy phrase; it’s a principle backed by compelling evidence about the consequences of missing even a handful of the market's best days.

What a Difference a Day Makes

Think about it: What happens if you decide, in a moment of concern, "Yes, I should sell my stocks now"? You might feel a temporary sense of relief from the immediate anxiety.

However, you then face the daunting task of deciding when to get back in. Do you wait until the market shows sustained upward movement? But what if that upward movement includes some of the very best-performing days of the entire year?

The research is clear on this point: Missing just a few of the best days in the market can dramatically reduce your overall returns over the long run…

Carson Research highlights a commonly shared chart illustrating this, emphasizing that even removing an average of less than one day per year (just 50 days between 1951 and 2022) can have a substantial impact.

Similarly, Wells Fargo Investment Institute’s research over a 30-year period (February 1, 1994, through January 31, 2024) found that missing the best 30 days took the average annual return of the S&P 500 from 8.0% down to a mere 1.8%, which was less than the average inflation rate. Missing even more — the best 50 days — resulted in a negative annual return on average (-0.86%).

These numbers aren't trivial; they represent significant erosion of your potential wealth.

JP Morgan Asset Management provides another compelling example, looking at the 20-year period from 2004–2023. An investment fully allocated to the S&P 500 would have grown by 9.8% annually…

However, if you missed the 10 best days during that period, your return would have been cut to just 5.6%, about half of what you could have achieved by staying invested.

Missing the best 20 days would have slashed your return by over 70%.

These examples underscore the profound cost of being out of the market during its peak performance periods.

What If Tomorrow Is That Day

Now, before you ask, “Should I sell my stocks now?” consider when these best days tend to occur…

It might seem logical that the best market days happen during periods of strong, sustained economic growth. However, the research reveals a different, and perhaps counterintuitive, reality:

The best days in the market often happen within “shouting distance” of the worst days…

In fact, Wells Fargo Investment Institute's analysis of the S&P 500 from 1994–2024 shows that all 10 of the best trading days in terms of percentage gains occurred during recessions, and six of those coincided with a bear market.

JP Morgan Asset Management's data from 2004–2023 reinforces this, stating that six of the seven best days occurred after the worst days, and seven of the best 10 days fell within two weeks of the 10 worst days.

This clustering of best and worst days has a crucial implication for the question, "Should I sell my stocks now?"

If you sell after a period of market decline, driven by the fear of further losses, you run a significant risk of missing the subsequent rebound, which could include some of the market's best-performing days.

You know what they say… You can't truly share in the victory if you’re on the sidelines when the game-winning shot is made.

Therefore, selling when stocks are low is essentially locking in your losses. You're taking a temporary dip in the market value of your investments and making it permanent.

To actually lose money in the market, you have to sell your investments for less than you paid for them. As long as you remain invested, those losses on paper are just that — unrealized.

And as the chart above clearly shows, the market has historically shown a tendency to recover over time, and by staying invested, you position yourself to benefit when that recovery inevitably comes.

When Should I Sell My Stocks?

This brings us to the crux of the matter: When is it a good time to sell stocks?

The argument presented by decades of research suggests that it is only a good time to sell stocks when you no longer want to invest in stocks….

This could be due to a fundamental shift in your financial goals, a change in your risk tolerance where you are no longer comfortable with the inherent volatility of the stock market, or perhaps because you need to access the funds for a specific purpose aligned with your long-term financial plan.

However, selling based on short-term market fluctuations, driven by fear or the hope of perfectly timing the market's peaks and troughs, is a much riskier proposition.

What About Professionals?

The allure of market timing — trying to predict the best times to buy and sell — is strong.

And many people believe they are, or could be, excellent market timers. However, the actual evidence overwhelmingly suggests otherwise…

Nobel laureate William Sharpe’s 1975 study concluded that a market timer would need to be correct an astonishing 74% of the time just to match the returns of a passive index fund with similar risk.

And even professional investors struggle with this…

A 2017 study found that target-date funds attempting market timing underperformed other funds. Morningstar research has also shown that most actively managed funds fail to beat their passive benchmarks over the long term.

The reason market timing is so difficult is precisely because of the unpredictable nature of market movements and the clustering of good and bad days.

Even professional pundits often have delayed reactions to market bottoms. Trying to anticipate these turning points consistently is a near-impossible task.

So the next time you find yourself wondering, "Should I sell my stocks now?" especially during a market dip, ask yourself: Have my long-term financial goals changed? Do I no longer believe in the potential for long-term growth in the market?

If the answer to these questions is no, then the more prudent approach, supported by historical evidence, is to stay the course. Consistent investing over time allows investors to benefit from compounding returns and reduces the impact of market volatility.

So Should I Sell My Stocks Now?

The bottom line here is that while the temptation to sell stocks during market downturns is understandable, it’s often a reaction driven by emotion rather than sound investment strategy.

While the actual percentages vary with the time frame studied, the data overwhelmingly agrees that missing even a small number of the market's best days can severely damage your long-term returns. And these best days frequently occur close to the worst days, making it incredibly difficult to time your exit and reentry effectively.

Selling low locks in losses and prevents you from participating in market rebounds.

The decision to sell should be based on a fundamental shift in your investment objectives, not on trying to outsmart the market’s short-term fluctuations.

After all, if consistently and successfully timing the market were a viable path to immense wealth, wouldn't we have seen at least one dedicated market timer topping the list of the world's richest people throughout history?

The absence of such figures appearing even once on those lists speaks volumes about the inherent drawbacks of trying to time the market.

So just keep buying until you don’t want to be invested anymore ever. Then, and only then, should you start selling your stocks.

And if you need some inspiration finding great stocks that aren't crashing right now, check out this short list of top stocks from my members-only investing community, The Wealth Advisory.