When to buy and sell shares

See what factors come into consideration and why timing is so important.

I’m often asked about the right time to buy or sell shares. On the buying side, the answer is simple: When you have the money. On the selling side, the answer is a little more complex.

When it comes to buying shares it’s possible to make tonnes of money by getting your timing right. But if you plan to wait for the market or a particular share to bottom out (the optimum time to buy) you could be waiting forever. There is simply no way of knowing when a share’s value will reach a low point before it starts to head north again.

So if you’re thinking of buying shares, my advice is to skip attempts at market timing and focus on deciding which shares are right for your portfolio. Then buy when you have the funds available.

When it comes to the right time to sell, the answer is when you need the money. If you don’t need the cash, don’t sell.

Turning over your shares frequently will only stack up brokerage fees. Plus, you may miss out on dividends and potentially be out of the market during upswings.

There are other good reasons to hang onto your shares. On shares you’ve held for longer than 12 months, the tax man gives you a 50% discount on any capital gains. But on shares held for less than 12 months, the full value of a capital gain is included in your taxable income, which reduces after-tax profits.

Nonetheless, if a share is consistently underperforming (and by that I mean continuing to fall in value or not recovering from a dip over a sustained period of months or years) you really need to think about offloading it.

There are some important things to consider before you do this though. Some shares perform poorly in terms of capital growth but shareholders hold onto them because they are a reliable source of fully franked dividends. 

When selling shares to raise cash, a trap many people fall into is to sell their best performing shares rather than their underperformers. It’s often based on the view that the outperformers must be due for a fall while the underperformers are due for a lift.

Personally, I hang onto my long-term outperformers and ditch the long-term duds. Persistently holding onto poorly performing shares thinking it must be time for them to come good, reminds me a bit of the old golf saying, “When you think your game can’t get any worse, it does.”

It’s the same with some shares: when you think they can’t go any lower, they do. If you’ve got any dogs in your portfolio, consider getting rid of them before they start biting.


Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.

Market ups and downs

Our free online learning module looks at how market fluctuations can impact investments.

Begin module

Explore your goals

Try our online tool to explore, prioritise and create your own goals timeline.

Start exploring

Discover a new way of banking

Imagine a bank account that helps you keep on track and tells you what's safe to spend.

Learn more

Sign up to our newsletter

Want to keep up to date with the latest news? Sign up now and be in the running to win 1 of 5 $300 Visa gift cards. Terms & conditions apply.

Sign up now

Important information

Show more

© AMP Life Limited. This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.