Afraid to Sell Stocks? Why Holding Costs You Money

Investing always involves buying and selling assets. Often the problem isn’t buying the wrong thing — it’s not selling at the right time. Below are common examples of why investors hesitate to sell and how that hesitation can harm long-term financial outcomes.

Holding until a stock recovers

Many investors hang on to a losing position in the hope it will return to its previous high so they can “break even.” That instinct to wait can keep you invested in an underperforming company long after better opportunities have passed.

While equity markets tend to rise over the long term, year-to-year returns vary widely and individual stocks can outperform or underperform dramatically. A company that once looked promising may never regain its former price, and clinging to that idea can prevent you from reallocating capital into investments with stronger prospects.

One practical rule I use with clients is this: imagine you sold the position today and had the same amount in cash. Would you use that cash to buy the same stock again? If the honest answer is no, it’s usually better to sell and redeploy the funds where they have a higher expected return or a better fit with your diversification goals.

Holding to defer taxes

Many investors avoid selling appreciated assets in taxable accounts because they want to defer capital gains taxes. For large gains, and for taxpayers in higher tax brackets, selling can trigger a meaningful tax bill and reduce the net proceeds.

But deferring taxes can carry hidden risks, especially when one stock makes up a large share of your portfolio. Concentration risk can be particularly harmful in retirement or during periods when you are drawing down investments. A single-stock position that looks tolerable while you are accumulating wealth can become a serious vulnerability when you start withdrawing funds.

Consider two real-world scenarios: one investor exercised employee stock options decades ago and has held the shares since; despite dividend income, the stock’s price has not moved much in 25 years, producing a below-average overall return. Another investor’s former employer — a technology firm — surged in value and now represents a significant portion of their assets. Although selling some shares would reduce concentration risk, emotional attachment and the fear of a tax bill have made that difficult.

Taxes are an important consideration, but they shouldn’t be the only factor guiding your investment strategy. Practical approaches include staged selling to spread gains across years, consulting a tax planner, or using tax-advantaged accounts when available. Weigh the potential tax cost against the risk of maintaining an overweight position and make a deliberate plan rather than letting tax concerns freeze your decisions.

“HODLing” cryptocurrency

“HODL” culture — holding crypto positions through dramatic price swings — is common among committed cryptocurrency investors. This piece isn’t a debate about the merits of bitcoin or other digital assets. The main concern is the level of exposure some people carry to crypto relative to their overall financial plan.

Cryptocurrencies are highly volatile. For savers with relatively short-term goals such as a wedding, a down payment on a home, or an upcoming large expense, that volatility is often inappropriate. As your time horizon shortens, consider shifting a portion of savings into less volatile alternatives — cash, guaranteed investment certificates (GICs) or short-term bond funds — to preserve capital and reduce the risk that market swings derail your plans.

Avoid analysis paralysis

As the old song goes, “know when to hold ’em, know when to fold ’em.” The same judgement applies to investing. Holding an asset for emotional reasons — pride, regret, or the hope of returning to breakeven — can be costly. If you struggle to evaluate your positions objectively, set clear rules for when to trim or exit a holding, or ask a trusted advisor for a second opinion.

Regularly review your portfolio for concentration risk, misaligned holdings, or positions you wouldn’t repurchase if you were starting from cash today. Making disciplined decisions about selling can improve diversification, free up capital for better opportunities, and reduce the chance that a single decision undoes years of financial planning.

Read more about investing:

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• Buying ETFs in Canada Tool: The MoneySense ETF Screener
• How to consolidate your registered accounts for retirement income in Canada
• Borrowing from your HELOC to invest in equities