If You Decide to Sell Stocks

All through the market’s implosion, you’ve listened to the Wall Street gurus who told you to hang on and stay the course. But now, with stocks at 50% off their peak, you’ve decided the market’s heart-stopping free-fall is bad for your mental health and that it’s time to sell and take some cash off the table. While the few optimists left on Wall Street may think it’s a bad idea, it can make better financial sense if you do something positive with the money you get.

One good idea is to pay off your credit card debt. Although interest rates on mortgages and other loans have backed off, rates on credit card debt are still in the 10% to 18% range. Using the cash you get from stock sales to pay off all or part of your debt will give you an exceptionally high guaranteed return on your money. Even better — it’s tax-free. If you have a $5,000 credit card balance at 11% interest, for example, and you’re currently making the minimum payment, paying it off will save you more than $560 over the next year.

Another way you can use the cash from stock sales is to put it in risk-free investments. That used to mean putting cash in a money market fund but with today’s money-fund yields in the cellar, certificates of deposit can give you a better return. You can currently invest in an FDIC-insured three-year CD and lock in a yield of about 3%. In these turbulent times, that can be an investment in peace of mind.