Thinking About Selling?

When you buy a car, a sofa, or another significant item, you probably realize you might not keep it forever. This holds true for investments, too. Before selling an investment, you’ll want to consider a number of factors. Here are some signs that it might be time to sell.

Performance Doesn’t Measure Up

Poor performance over a short period may not be a cause for concern. But think about selling an investment if it has consistently underperformed similar investments or a benchmark index over several years.

Your Portfolio’s Balance Is Off

Your investment portfolio may become unbalanced as a result of market volatility. If one asset type now makes up a larger (or smaller) share of your portfolio than you intended, you should consider switching out of some investments and into others to regain your balance. But be sure to consider the tax consequences before you sell. Another way to rebalance is to gradually invest additional money in the underrepresented asset class.

Your Risk Tolerance Has Changed

When you experience a major change in your life, your risk tolerance may change, too. If you get married, have a baby, get divorced, or lose a loved one, review your investment strategy. You could find that it’s too aggressive or conservative for your goals in your new stage of life. As you near retirement, your investment strategy generally should become more conservative since you have less time to recover from any losses.

Tax Opportunity

If an asset has appreciated significantly, you may want to consider selling it while the capital gains tax rates remain low. The 2010 Tax Relief Act extended the maximum rate of 15% on long-term capital gains for two years — 2011 and 2012. Beginning in 2013, net capital gains tax rates for individual taxpayers will revert to rates ranging as high as 20%.

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Insuring Your College Student

In the midst of packing clothes, bedding, and a laptop for your child to bring to college, don’t forget another necessity — insurance. It’s important that your student be protected when he or she is away from home.

If your child will remain on your family’s health insurance policy, make sure that the medical providers in the area where your child will be attending school will accept the coverage. The college also may offer a health insurance plan, but you should check its coverage limits before joining.

With proper notification, your existing car insurance policy will probably provide coverage if your child takes a car to school. You should notify your carrier if your child doesn’t take a car to college because you may be able to lower your premium.

An endorsement to your homeowners insurance policy likely will cover your child’s possessions if your child lives in a dorm room. If your child is living off campus, you will probably need to purchase a renters policy to cover his or her possessions and provide liability protection.