Why selling stocks for cash is a bad idea

If you have already sold a bunch of stocks, skip to the next post. If you have waited out the stock market collapse but are still thinking about selling, keep reading.

Selling stocks for cash may seem safe and be appealing to many folks, but there are reasons why doing nothing is the better option, says a recent story in the NY Times.

"By fleeing for the comfort of safe and insured, however, investors with a time horizon beyond a few years may be doing real damage to their long-term finances," the story says. "Selling now implies you are getting out at the right time (actually, that was about a year ago when the Dow was above 14,000) and it also implies you know when to get back in.

"But if you sell now, you'll be locking in your losses. And once you're in cash, there isn't much upside. In fact, with interest rates low, you're likely to lose money in cash, because inflation will probably eat up the after-tax returns you earn from a savings or money-market account."

That assumes you won't need the money to pay for your car, mortgage, tuition, groceries, or anything else. It all depends on your needs, your age, and your savings. In any case, try not to make decisions based on emotions. In the long run, it does not make $ense.