With interest rates rising and corporate profits struggling, share prices have been coming down. So with my Stocks and Shares ISA still worth more than I put in, should I cash in while I’m ahead?
Higher interest rates make holding cash more attractive than it was a year ago. Today, I could open an account that would pay me 4.8% interest a year for three years.
Nonetheless, I don’t think that selling out of my Stocks and Shares ISA is a good idea. Here are three reasons why.
Selling and buying
I know that I want to own shares in profitable businesses for the long term. So if I cash in my holdings today, I’d be looking to buy my investments back in the future.
One problem is that I won’t know when to buy them back again. Selling is the easy part — buying the shares back again is much harder.
I think that the stock market is likely to go lower in the near future, but I don’t know when that might change. While share prices have generally fallen this year, there have been some significant rallies.
That means that there’s a real danger of finding myself having to buy my investments back at higher prices if I sell out of my ISA today.
Investing
There’s a bigger reason that I’m not selling my stocks, though. That’s because selling now and trying to buy back in later just doesn’t fit with how I think about building my wealth.
As I see it, investing isn’t about buying shares at one price and quickly trying to sell them again at a higher price. That’s trading, rather than investing.
I don’t have any problem with trading. But I prefer to just get on with the business of investing for myself.
To my mind, that involves making money by owning shares in businesses and benefiting from the money they make. And that means keeping the shares for a long time.
Rewards
My last reason for not cashing in my stocks is that I’ve seen the rewards that the stock market can offer patient investors. Berkshire Hathaway CEO Warren Buffett is a good illustration of this.
One of my favourite Buffett quotes says that the stock market is a device for transferring money from the impatient to the patient. If he’s right about that, then I know which side I want to be on.
As an example, Buffett has owned Coca-Cola shares since 1988. And the Berkshire CEO’s patience with the stock has been rewarded handsomely. The share price has increased by over 2,000% in the last 34 years.
For me, that’s a powerful reason not to sell my stocks. So I won’t be cashing in my Stocks and Shares ISA any time soon.
