Exiting the investment—when is the best time to do so?

One day I received a WhatsApp message from my son: “Mom, can I send you my Bitcoin for selling?” He’d had enough at a price of around CHF 63,000 and wanted to take the profit. The money was probably needed for something else. I didn’t want to make myself unpopular, so I didn’t ask. The Bitcoins were transferred from his hardware wallet to Mom, who then sold them and sent the money via TWINT.

When investing, you often read and hear about the best possible time to enter the market (which doesn’t really exist), lump-sum investing versus phased investing to achieve a cost-averaging effect, and why a long time horizon makes sense. But when exactly is the right moment to exit? Here are some thoughts and ideas to help you better determine this for yourself and your investments.

Why exit an investment at all?

Put simply, there are three scenarios that might motivate you to exit your investments:

1. You’ve reached a predefined goal: for example, your money has grown to a certain amount, or the previously set point in time has arrived and you need the funds.
2. Selling from a position of strength: the investment has performed very well and you want to secure the gains.
3. Selling from a position of weakness: the investment is performing only moderately or is even making losses, you need the money, or the investment has become too expensive and you want to switch.

Depending on the reason and your goal, your exit strategy will therefore look different.

How to exit successfully

The better the entry, the easier the exit

Look at your investment strategy as a whole. Ideally, you set clear goals right from the start of your investment: Is your investment speculative, with the aim of realizing quick gains, or is it intended for long-term wealth accumulation? Do you want to reach a specific amount? Or will you need the money at a certain point in time—for example, for travel, home ownership, or retirement? All of these considerations not only help with your entry and overall strategy, but also give you clear signals for when to exit.

If you didn’t originally set a clear goal for your investment, it helps—before a potential exit—to remind yourself why you invested in the first place and to question why you want to exit right now. This can help prevent emotional decisions as much as possible.

Preparation matters

If you plan to liquidate your investment at a specific point in time—for example because you need the money or have reached a certain amount—you ideally still have some time to prepare your exit accordingly. Possible aspects to consider include:

• Shifting from higher-risk asset classes to lower-risk ones, for example by reducing your equity exposure
• Clarifying tax implications, which is especially important when withdrawing pension assets
• Checking and calculating exit costs, for example whether a fund charges fees when selling
• Defining a withdrawal strategy: Do you want to withdraw the entire amount at once, or make staggered withdrawals (e.g. monthly) while keeping the rest invested?

With staggered withdrawals, depending on the size of your investment, it may be worthwhile to have your strategy professionally calculated using a simulation. During the withdrawal phase, you are exposed to market fluctuations and the so-called sequence-of-returns risk: the timing of withdrawals can significantly affect the overall success of your portfolio. According to simulations, more than 50% of a portfolio’s success depends solely on the first five years of withdrawals (see this article). You can reduce this risk, for example, through flexible withdrawal strategies.

On the internet and in various forums, the so-called 4% rule is often recommended for staggered withdrawals. This rule originates from the Trinity-Study and suggests that 4% of the original value can be withdrawn annually from a diversified equity portfolio over 30 years, while the risk of completely running out of assets prematurely remains very low. However, this rule of thumb should be treated with great caution. Critics and further calculations have shown that the optimal withdrawal rate is likely lower—around 2.5 to 3.5 percent. More details and calculations can be found in this article.

Compare returns and costs

How does your investment perform compared to similar investments or benchmarks? Compare your returns regularly, for example once a year. If you find that your investment consistently underperforms compared to market indices such as the MSCI World, this may be a sign that it’s time to reassess it and consider switching.

The same applies to costs. Once a year, take a close look at what your investments are really costing you and whether there are opportunities for optimization. Even small percentages can significantly reduce your returns over time.

One of the most common challenges is holding on to losing or overly expensive investments in the hope that they might recover in the future or that returns will eventually offset the high costs.

Of course, it’s painful not only to accept a loss “on paper” but to actually realize it. However, while you’re waiting, opportunity costs can arise. To illustrate: while you patiently wait for your investment to recover by, say, 5 percent, the overall market may have advanced by 15 percent.

One possible approach here is partial sales, where you reduce a position without fully liquidating it. This lowers your risk of even greater losses if, for example, the stock continues to fall, frees up capital, and still gives you a chance to limit your current loss if a recovery occurs.

The same principle of partial sales also works when your investment is performing very well and you want to lock in profits. By selling part of the position, you secure gains while still retaining the opportunity to benefit from further growth.

Don't let emotions guide you

There are countless analysis methods, charts, and different rules you could apply to your investments. What’s important to understand, however, is that emotions are one of the main causes of investment mistakes—and can even move entire markets. If you’ve set yourself a clear goal, this helps you keep your emotions in check and avoid being overly influenced by too much news, as well as by fear and greed.

An emergency fund that you can fall back on if needed helps you avoid unwanted losses, because in an emergency you won’t be forced to sell your investments at a potentially unfavorable time. Instead, it gives you the flexibility to plan your exit properly.

For those who trade stocks more frequently, a consistently applied stop-loss is essential to prevent excessive losses. Rather than relying heavily on chart analysis, it can be more helpful to focus on the companies and industries themselves in order to better interpret financial information.

Just like with entering an investment, there is really no ideal time to exit. It depends on many factors, including the market environment and your risk tolerance. By setting clear goals, reviewing your investments regularly, and staying rational, you improve your chances of exiting at the right moment for you. Personally, once I’ve exited, I don’t look back to see whether there might have been more upside—only to end up regretting it. The only thing that’s certain is that new opportunities always come along, and for me, a bird in the hand is often worth more than two in the bush.