The very first episode of Financial Decoder discussed the sell decision—in part because there are so many cognitive and emotional biases that come into play with that decision. Many people are prone to something called the disposition effect, which is the tendency to sell assets that have increased in value but hold on to investments that have dropped in value.
In part one of this special two-part episode, Mark Riepe analyzes the decision of when to sell an individual stock and an individual bond. First, Mark talks with Kathy Jones, Schwab’s chief fixed income strategist. They discuss whether or not you should sell a bond if it’s been downgraded, if you should sell before the bond’s maturity date, and how defaults and bankruptcies might affect your decision, among other topics. Next, Mark speaks with Steven P. Greiner. Steve is a senior vice president and head of Schwab Equity Ratings. Steve and Mark consider whether you should sell a stock based on changes in its fundamentals, such as P/E ratio and dividend yield, as well as how to react to bad news and big swings in the market.
Part two of this episode will examine the decision of when to sell a mutual fund and an exchange traded fund, or ETF.
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Important Disclosures:
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.
All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.
Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.
Investing involves risk including loss of principal.
Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly. For more information on indexes please see www.schwab.com/indexdefinitions ( .
Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance.
Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors. Lower rated securities are subject to greater credit risk, default risk, and liquidity risk.
All corporate names are for illustrative purposes only and are not a recommendation, offer to sell, or a solicitation of an offer to buy any security. Supporting documentation for any claims or statistical information is available upon request.
Tax-exempt bonds are not necessarily a suitable investment for all persons. Information related to a security’s tax-exempt status (federal and in-state) is obtained from third-parties and Schwab does not guarantee its accuracy. Tax-exempt income may be subject to the Alternative Minimum Tax (AMT). Capital appreciation from bond funds and discounted bonds may be subject to state or local taxes. Capital gains are not exempt from federal income tax.
This information does not constitute and is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends consultation with a qualified tax advisor, CPA, financial planner, or investment manager.
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