When I was in my 20s, my investment time horizon was about as long as it could be. I had the ability to ride out pretty much anything that would hit the FTSE 100, knowing that I’d only need to realise the proceeds of most of the funds decades down the line. However, times change and I get older. I also have time periods when I’ll need to sell some of my FTSE 100 investments in order to afford things such as a house deposit. So when the time comes when I do need liquidity, what are the best ways to go about it?
Reduce exposure to high risk stocks
First, I’d never look to sell everything in one go. Even if I’m getting to retirement age, there’s no reason why I simply have to call it a day and sell all my stocks. In fact, I think I’ll always hold some stocks, even as I get older. I’ll likely shift my investing stance to a much more conservative one, but this wouldn’t be a problem.
When I it came time to realise some profits, I’d look to sell off my growth stocks and higher risk companies first. This is because as I get older, lower volatility stocks would be preferable. Not only does it ease my stress levels, but it also reduces the risk that I’d have to sell for a loss if volatility is high.
By holding on to some conservative stocks and selling riskier ones, I’ll be able to realise profits from my FTSE 100 investments but still keep some skin in the game.
Hold on to dividend stocks
Another way I’d look to realise profits from my long-term FTSE 100 investments is to sell stocks that don’t pay me income. Dividend-paying stocks allow me to generate passive income in my portfolio. As I get older, this extra income will come in very handy. Particularly after I retire, having dividends flow into my investment account will provide me with more money to spend.
So even though I’ll likely sell some stocks, if I can hold onto some of my favourite dividend payers then it should allow me to get the best of both worlds. If I need to generate more liquidity at some life stages (such as for a house), then I’d prefer to sell dividend stocks that I’m in a profit with, if possible. Selling a dividend stock for a loss doesn’t really make sense if I’m getting paid a steady stream of income from it.
Trimming profitable FTSE 100 investments
Finally, I’d look to realise profits by trimming my positions, instead of selling it all. For example, let’s say I made a FTSE 100 investment with £1,000 that is now worth £2,000. Instead of selling the full position, I could simply trim the profit and sell £1,000. This generates cash, but at the same time leaves my original position amount there to grow further.
In this way, I can raise liquidity but still hold on to some of my favourite shares that have generated me a profit.
Overall, it’s inevitable that I’ll need to sell some of my long-term FTSE 100 investments for different life events or due to retirement. But the above points show that I can be smart about it, to maximize my returns.