IRA investment advice: Five Signs That it’s Time to Sell an Investment in Your Self-Directed IRA

Estimated reading time: 3 minutes(Last Updated On: November 30, 2018)

It’s generally thought that the decision of when to sell a particular asset can be just as important as the decision of when to buy that asset. Sell too soon and you may miss out on future gains, but sell too late and you may incur a loss or miss out on better investment opportunities elsewhere. Knowing when it’s time to exit from a particular investment applies to assets held within your self-directed IRA, so here is some IRA investment advice to know when it’s appropriate to do so.

IRA investment advice #1: There is a significant change in market conditions. A good piece of IRA investment advice is to be aware of a noticeable shift in overall market conditions, such as a sharp drop (or increase) in interest rates or overall corporate earnings, then you may decide that the reasons you had for initially buying a particular investment in your self-directed IRA are no longer true.

IRA investment advice #2: There is a significant change in market economics. By this we’re not referring to the overall economy or stock market, but the local and specific market relating to a particular investment. So, for example, if you own a piece of investment real estate in your self directed IRA, but notice that the surrounding neighborhood may be beginning to deteriorate, or that rents are starting to go flat or even drop, you may decide that it no longer makes sense for you to know that particular property.

IRA investment advice #3: You need to diversify. Investment diversification is still a cornerstone of most individual investors being successful. What’s sometimes overlooked, however, is that diversification should be considered not so much in the context of a particular account, but within your overall investment portfolio. This means you should consider diversification not just within your self directed IRA, but within all of your investments, including other retirement accounts and your non-retirement investment accounts. If you need to diversify, you may decide that the most appropriate course of action is to sell a particular investment that you hold within your self directed IRA.

IRA investment advice #4: Your risk tolerance has changed. Depending on your individual circumstances, you may decide that it’s time to sell a particular investment when your risk tolerance changes. For example, if a significant career change requires you to guard more against loss of capital, then you may want to sell your risky investment assets and transition to a safer investment type.

IRA investment advice #5: Your income needs have changed. People hold different investment types for different reasons. In the broadest terms, there are two common ways that people hope to profit from a particular investment: an increase in the underlying value of the asset, or current income that it generates. Of course, some investments may also have elements of both these factors. The further you are from retirement, the more willing you may be to hold investments in your account that don’t produce any current income. After all, during this stage of your life, the purpose of your account is to build the largest possible account. But once you enter retirement, you may decide that it’s appropriate to shift your assets into investments that generate current income.

Be sure to give as much time to your analysis on when to sell your investments as you do on when to buy them.

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