If You’re Under 40, Selling Investments Should be a Last Resort

So as you age in the workforce, the amount you earn or your earning power SHOULD increase with age. This is a historical fact, so just keep it in the back of your mind. Sure, it’s hard not to envision our current economic situation not lasting forever. But, eventually, you WILL receive salary or hourly wage increases, though it’s just not soon enough.

Unfortunately, over the past few years, Americans have been confronted with lower wage increases, no wage increases or even declining wages. What money anybody has leftover is likely not going into the stock market, but rather toward essential purchases or just to do something fun to pass time (e.g. Entertainment expenditures). I remember in the late 90′s using any money that I had leftover to fund my eTrade account so that I could invest in dot com stocks. In hindsite that was a lot of fun as long as you were on the ascent and not the spiral downward. And, in today’s stock market, who blames anyone for not wanting to put their extra cash into the market. One week the stock market is making a descent of 500 points and the next week it’s up 700 points. Yikes, a lot of volatility out there to be making solid investment decisions.

The point of this post is to tell those under 40, with any decent investments in the stock market (e.g. Blue chips like Google, GE, Chase, etc.) to use the sale of investments as a last resort for funding short term cash needs. Of course, if you have reached a certain investment goal or return by all means it may make sense to sell your position; however, given the under 40 group, the best thing you can do is to build that investment nest egg. When you  start taking a little here and a little there, this turns into a growing snowball. As long as you have decent confidence in what you are invested in, then I wouldn’t even watch the stock market.

Let’s face it though, the reality is that sometimes you just need cash to pay for unforeseen issues.

Therefore, start contributing to an emergency fund which can take the place of thinking about selling investments or retirement funds (e.g. 401k) to cover cash needs as they arise . You could start with $25 a week and work your way toward a nice amount (over $1,000) in less than a year.

The worst thing for someone with future earning potential is to believe that your situation will remain as is and to use your assets to fund short term expenses. Discipline to set your investments and forget them, will likely yield a smile on your face a few years down the road.