Opinion: When to Buy, Hold and Sell ETFs | Canstar (2024)

How do you know when to buy, sell and hold ETFs? In this article, we explore the different strategies you can take when adding ETFs to your portfolio.

Do you ever dream of being like Biff in Back to the Future?

Spoiler Alert (for those of you who have been living under a rock since the 1980s!)

In Back to the Future, Biff travels back in time to give his past self a copy of The Sportsman’s Almanac. This book contains details of future sports results before they happen. Biff’s past self then uses this information to get rich by betting on the outcome of every sports event for the next 50 years.

Imagine what you could do with The Australian ETF Almanac!

If you knew when every market high, low and crash was going to happen in the next 50 years, then knowing when to Buy, Sell and Hold Australian ETFs would be a piece of cake!

Luckily, you don’t need The Australian ETF Almanac or knowledge of the future in order to make smart ETF investing decisions today. These simple guidelines on when to Buy, Sell, and Hold ETFs will help you to be well on your way to making your future self financially secure – without help from Biff!

When to Buy ETFs

The best time to buy ETFs is at regular intervals throughout your lifetime.

ETFs are like savings accounts from back when savings accounts actually paid you interest. Think back to a time when you (or your parents!) used to invest in your future by putting money into a savings account. In a low-interest-rate environment savings accounts are no longer an effective way to invest for your future.

But ETFs are!

ETFs are where you should invest your excess income throughout your working life. I don’t mean money that you are saving to buy a house with, or saving for a wedding. I mean money that you are never going to need again.

Well, at least not until your retirement!

One way to think about it is every three months taking whatever excess income you can afford to invest – money that you will never need to touch again – and buy ETFs!

Buy ETFs when the market is up. Buy ETFs when the market is down. Buy ETFs when we get a new Prime Minister. Buy ETFs when you call your mum each month.

The point is to buy ETFs at regular intervals, not just because you think now might be a good time to buy.

Oh and I’ve got you covered if you don’t know how to buy an Australian ETF.

If you regularly invest, and invest only what you can afford to, then over your lifetime the power of compound interest will make you look like you had a visit from Biff from Back to the Future too!

When to Sell ETFs

In an ideal world, we would all have enough invested in ETFs to live off the dividends in retirement. Ideally, you would never have to sell your ETFs! Unfortunately, this will be true for precious few people. Here in the real world, you will more than likely need to sell your ETFs at some stage in your life. But when is the right time?

The best time to sell ETFs is when you need cash to fund your retirement!

We all need cash all the time. To eat. To live. To buy new cars. To go on holidays. But your ETF portfolio should not be raided for life’s essentials. Stay strong, don’t sell those ETFs just yet, you will need those ETFs for retirement!

Here’s a tip, when you approach retirement age and need to live off your investments, don’t get hung up on dividends. Too often I see investors go chasing dividend returns at the expense of capital gains. In the end, money is money, regardless of whether you earned it through dividends or through capital gains. And investing in ETFs will earn you both!

Money earned through dividends will automatically be paid out to you at regular intervals. But money earned through capital gains will require you to sell your ETFs to put that money in your pocket.

This isn’t something to be afraid of!

→Related article: 4 Financial risks that all Investors should be aware of

Every quarter or every 6 months when you receive your dividend payment, just log into your broker account and sell off a small number of shares in your ETFs to access extra cash. That is the right time to sell your ETFs.

Now I can’t talk about when to sell ETFs without briefly mentioning when not to sell ETFs.

When not to sell ETFs – during a market crash!

This might sound obvious, but emotions run high during events like the global financial crisis or during any stock market crash. Years of smart investing can be undone in a single moment if you are financially pressured into selling your ETFs at the absolute worst time to do so during a market crash.

The way to avoid this is to avoid the perceived pressure.

Don’t invest more than you can afford to, don’t use leverage to invest, and maintain an emergency fund of cash to support yourself for a year so in case you lose your job during the next market crash.

When to Hold ETFs

ETFs should be held throughout your working life and into your retirement.

The best time to Hold ETFs is right now. And tomorrow. And the next day. And next month. And next year. And in 10 years’ time.

How do I know this? Well, I am going to let you in on a little stock market investing secret.

The market always goes up.

Don’t believe me? Take a look for yourself.

Opinion: When to Buy, Hold and Sell ETFs | Canstar (1)

The simple truth is that when you invest in the stock market over timeframes of 20+, 30+ or 40+ years, the market always goes up. It always has.

And I can already hear you asking “Yeah but, will it always go up?”

Only Biff knows that.

But the past tells us that the longer you hold ETFs for, the better your investment returns will be. If the market always goes up over a long enough time period – as it always has in the past – then the best time to hold ETFs is today.

The Best Time to Buy, Sell & Hold ETFs

Alright let’s break down all that chat into a few simple guidelines on when you should Buy, Sell & Hold ETFs:

  • Buy ETFs at regular intervals
  • Invest excess income that you will not need to touch again
  • Buy the Best ETF’s in Australia
  • Hold ETFs throughout your working life
  • Hold ETFs as long as you can, give compound interest time to work for you
  • Sell ETFs to fund your retirement
  • Don’t sell ETFs during a market crash

Consider this your Australian ETF Almanac in brief. All that’s left is for you to stop making excuses, get amongst it and start investing in Australian ETF’s.

Go on, get cracking!

Your future self will thank you.

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Opinion: When to Buy, Hold and Sell ETFs | Canstar (2024)


Opinion: When to Buy, Hold and Sell ETFs | Canstar? ›

But the past tells us that the longer you hold ETFs for, the better your investment returns will be. If the market always goes up over a long enough time period – as it always has in the past – then the best time to hold ETFs is today.

How do you know when to buy and sell ETFs? ›

When to buy and sell ETF units. To get an ETF price that is more likely to represent its underlying value, place your trades at least 30 minutes after the market opens. It's also better to buy or sell ETFs when the market for the underlying asset is open.

Should I hold or sell ETFs? ›

A lack of trading activity means the sale is made below the value it would have in a volatile market. Investors can choose to hold their ETFs for a return in action. Nonetheless, a decline in liquidity can mean a drop in value for both the short and long term, which makes investors more likely to sell.

Should you wait to buy ETFs? ›

If you wait to buy an ETF until you are sure it will pay off for you, you'll probably pay a higher price. You are better off to buy sooner—when you are “pretty sure,” rather than “certain.” By the time you're sure an ETF is a good buy, many other investors may have come to share that opinion.

How long should you hold on to ETFs? ›

Similarly, you should consider holding those ETFs with gains past their first anniversary to take advantage of the lower long-term capital gains tax rates. ETFs that invest in currencies, metals, and futures do not follow the general tax rules.

How often should you buy and sell ETFs? ›

Every quarter or every 6 months when you receive your dividend payment, just log into your broker account and sell off a small number of shares in your ETFs to access extra cash. That is the right time to sell your ETFs.

How do you know if an ETF is doing well? ›

Since the job of most ETFs is to track an index, we can assess an ETF's efficiency by weighing the fee rate the fund charges against how well it “tracks”—or replicates the performance of—its index. ETFs that charge low fees and track their indexes tightly are highly efficient and do their job well.

Why is ETF not a good investment? ›

ETFs are subject to market fluctuation and the risks of their underlying investments. ETFs are subject to management fees and other expenses. Unlike mutual funds, ETF shares are bought and sold at market price, which may be higher or lower than their NAV, and are not individually redeemed from the fund.

Is it OK to hold ETF long-term? ›

Nearly all leveraged ETFs come with a prominent warning in their prospectus: they are not designed for long-term holding. The combination of leverage, market volatility, and an unfavorable sequence of returns can lead to disastrous outcomes.

What is the ETF tax loophole? ›

Thanks to the tax treatment of in-kind redemptions, ETFs typically record no gains at all. That means the tax hit from winning stock bets is postponed until the investor sells the ETF, a perk holders of mutual funds, hedge funds and individual brokerage accounts don't typically enjoy.

What is the 10 am rule in stock trading? ›

Some traders follow something called the "10 a.m. rule." The stock market opens for trading at 9:30 a.m., and the time between 9:30 a.m. and 10 a.m. often has significant trading volume. Traders that follow the 10 a.m. rule think a stock's price trajectory is relatively set for the day by the end of that half-hour.

What is the downside of ETFs? ›

For instance, some ETFs may come with fees, others might stray from the value of the underlying asset, ETFs are not always optimized for taxes, and of course — like any investment — ETFs also come with risk.

What day of the week should I buy ETFs? ›

Timing the stock market is difficult, but understanding when to trade stocks can help your portfolio. The best time of day to buy stocks is usually in the morning, shortly after the market opens. Mondays and Fridays tend to be good days to trade stocks, while the middle of the week is less volatile.

What is the 30 day rule on ETFs? ›

If you buy substantially identical security within 30 days before or after a sale at a loss, you are subject to the wash sale rule. This prevents you from claiming the loss at this time.

Do I pay taxes on ETF if I don't sell? ›

At least once a year, funds must pass on any net gains they've realized. As a fund shareholder, you could be on the hook for taxes on gains even if you haven't sold any of your shares.

Can an ETF go to zero? ›

For most standard, unleveraged ETFs that track an index, the maximum you can theoretically lose is the amount you invested, driving your investment value to zero. However, it's rare for broad-market ETFs to go to zero unless the entire market or sector it tracks collapses entirely.

How often do you sell ETFs? ›

There are no restrictions on how often you can buy and sell stocks or ETFs. You can invest as little as $1 with fractional shares, there is no minimum investment and you can execute trades throughout the day, rather than waiting for the NAV to be calculated at the end of the trading day.

Can I buy and sell ETF on same day? ›

Since ETFs are traded on the stock exchange, they can be bought and sold at any time during market hours like a stock. This is known as 'real time pricing'. In contrast, mutual funds can be bought and redeemed only at the relevant NAV; the NAV is declared only once at the end of the day.

Can you sell ETFs whenever you want? ›

If you're interested in selling ETFs, you can do it at any time during regular stock market hours, just like a stock.

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