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You can withdraw the money you have invested in stock markets anytime, as no rules are preventing you from doing so. However, there are fees, commissions, and costs that you have to consider. When stock markets fall, investors feel comfortable withdrawing money and holding cash. While cash gives you a sense of security in the short term, it may not be wise to do so in the long run. That’s why, when the markets fall, instead of thinking of how to get your money out of the stock market, restructure your short-term equity plans to meet your long-term goals.
Key Takeaways
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You can withdraw money from the stock market anytime, but consider charges, timing, and long-term goals before selling investments.
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Holding cash offers liquidity, stability, and emotional control, helping investors act wisely during market volatility or emerging opportunities.
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Unrealised losses become real only when you sell; temporary market declines often recover if company fundamentals remain strong.
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Selling stocks is reasonable only for weakened fundamentals, essential financial needs, or portfolio rebalancing, not emotional reactions to market downturns.
Benefits of Holding Cash
Cash holding can seem unproductive, yet it has substantial strategic value to investors. Cash gives you liquidity and the freedom to move fast when new opportunities present themselves, and particularly during a downturn where good stocks are underestimated. It also serves as a cushion when there is volatility, so that your portfolio is not subjected to sudden losses.
Furthermore, holding cash helps to minimise emotional decision-making, allowing you to reconsider your objectives without being in a hurry. Be it due to better entry points or a withdrawal strategy, cash hoarding enhances financial freedom and stability in the long term.
When a Loss is Not Really a Loss
You do not always make a loss in the stock market unless you sell the investment. Swings in the market are natural, and temporary drops are usually a result of the emotions in the short run and not the actual value of a company. If the fundamentals remain strong, it may be better to stay through the volatility and watch investments recover and grow in the long run. Most investors incorrectly tend to book losses through premature exit. Understanding what unrealised and realised losses mean will help you stay disciplined. In some cases, patience can turn a short-term setback into a long-term gain, especially in long-term investment plans.
How to Get Money Out of the Stock Market?
Before you decide to sell a stock, weigh all the factors. Check the price trend, news headlines, company announcements, and other events that may influence the stock price. Once you’ve done that, you can cash out of your stocks in four steps:
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Log on to your brokerage account.
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Choose the stock holding that you would like to sell.
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Place an order to sell the shares.
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The brokerage will raise a unique order number for the order placed.
After you’ve done the above steps, keep the following in mind:
Track the order – Check the order book for pending orders and the ones already executed. Use the unique order number to track your order. If it has been executed, then it will be moved to the trade book. The trade book tells you the amount with which the stock was purchased and the average.
Reconcile your order – Once the trade has been executed, reconcile the trade summary with the contract note. Check your trade account to see your cash balance. Keep a tab of the profit and loss that you make through the stock sale for tax purposes.
If you want to transfer your cash from the trading account to the bank account, make sure the two are linked.
Should You Take Cash Out of the Stock Market? [
When the stock market falls, and your funds give you negative returns, it is only a paper loss, because the value of the stock can change. However, the moment you convert your stocks to cash, you turn your paper loss into an actual one. Investors know that the markets will rise and fall, and cashing out will not give you the chance to benefit from market rebounds. A market turnaround can give you the scope of a break-even, if not the opportunity to profit. If you cash out, then there is no hope for recovery.
Inflation also has a devastating effect on cash. It erodes the value of money and reduces its purchasing power. Inflation can also hurt your equity returns. But you can adjust your holdings to more growth-oriented stocks, while you can do nothing with cash.
Holding cash makes you lose out on opportunity cost. Opportunity cost is the cost incurred for not choosing the best alternative. The potential of money against the stock market is negative in the long run, as inflation will erode the purchasing power of cash. Hence, the stock markets are a better option.
When Should You Sell in the Stock Market?
When the market tanks, you tend to sell your stocks at a price lower than your purchasing price. This is a direct contrast to a good investing strategy. Selling shares requires you to time the market, and if you fail to do that, it can lead to significant losses. However, selling may be warranted if the company's fundamentals have deteriorated, you need the cash for a life goal (e.g., retirement, house down payment), or you are rebalancing your portfolio.
The Opportunity Cost of Holding Cash
Keeping money in your hands might seem like a secure thing to do when the market is uncertain, but there is one cost to this that you can never see, which is opportunity cost. When cash is lying idle, it is getting little to no income, it decreases its purchasing power, particularly when it is adjusted to inflation. In the meantime, good stocks, mutual funds, or other growth-oriented investments can appreciate over time and generate long-term wealth that cash cannot create.
If you hold onto cash, you take the risk of missing out on market recoveries, compound returns and favourable entry points. Although it is prudent to have some liquidity in case of an emergency, having excessive liquidity will restrain future growth. Maintaining a balanced strategy, such as keeping necessary cash and being invested based on long-term objectives, will aid in reducing the opportunity cost and contribute to the consistent value creation of wealth.
Conclusion
Market crashes are nerve-wracking for even seasoned investors. But equity investing should be a long-term outlook. Market conditions will change, and you should stay invested to reap the benefits of a rising trend. You can revisit your portfolio and make desired changes to get the best out of the stock market.