When would you sell an ETF?

Question

when should i dump an ETF? at what percentage of loss should it be sold and when should i collect profits.

Answer 1

Everyone has a different take.  If you're investing long term, then hold your ETF.  If it takes a dip, buy more.  If your investment is up, consider selling a portion of your shares when it's up 20% or more (profit taking).

Generally, you should adjust your holding based on your asset allocation.  If you are targeting say large cap value for 15% or your portfolio, then sell of some shares when it above that (say 20-25% of your portfolio).  Add to it when its down (you can add to these postions by taking profits from your winners).

But any buy/sell decision depends on your investment style and long range/short range range goals.

Answer 2

I'd sell some of an etf, or any investment, to rebalance back to my proper asset allocation.

Let's say my risk tolerance says I should be in 50% bonds and 50% equities. I put 50% of my money into a total stock market ETF and 50% into a total bond market etf.

Over the course of a year the stock market does VERY well and my bond allocation is now at 40% and my total stock is at 60%. At that point I'd rebalance back to 50-50 assuming my risk tolerance hasn't changed.

A change in risk tolerance is another reason you might want to reallocate.

Answer 3

An ETF is basically a sector fund or an specialty allocation fund.   I would treat it as a collection of stocks that meet a given purpose or goal.  When the goal has been met, sell.  

Retracement is one attribute of a buying goal and when there is enough of a move up from that goal, from the retracement, it might be time to sell.   I would watch for SEC rules changes and current events that indicate that the goal for growth might be stunted a bit.

Today's market is not long term unless it is in commodity stocks and or companies that move those commodities and tech.  Other than that, companies that do well at earnings times, specialty retailers and financials that are invested in these things.

The value of the dollar and the value of oil are determinant factors.  There are many things.....can't go into all of them here.  Biggest catchall for stocks is when to buy and when to sell.

If the financials are reporting huge losses, write downs,.....then you have to figure they will have to sell some of the stocks in non financials.  When they do this, the non financials plummet.   And each of these ETFs has stocks that are in them that the financials own too.

It is a nail biting situation.....the subprime, credit, oil and other commodity bidding game that is going on.   Had the US government not given Bear Stearns money and other companies that were about to go under, virtually free money...low interest....  to play with more in commodities and the stock market,  this would have been a lot worse!

Be careful out there.....

Another rule is that when you are up in a parabolic fashion, put in a limit stop and or buy puts against the stock to protect against a plummet.

Good luck