Ask The Compound: “When Should I Sell My Stocks?”

Podcast: Ask The Compound
Hosts: Ben Carlson & Duncan Hill
Date: May 28, 2025

Episode Overview

This episode of Ask The Compound is centered around one of the thorniest questions in personal finance: When is the right time to sell your stocks? While buying strategies are widely discussed, selling is often neglected, especially for those approaching retirement or large life events. Ben Carlson and Duncan Hill work through audience questions on topics like using stocks in an emergency fund, approaches to Required Minimum Distributions (RMDs), using home equity for renovations, considering pension values in retirement planning, and recommendations for fiction books.

Key Discussion Points & Insights

1. Using Stocks as an Emergency Fund

Timestamp: 02:06 – 06:48

• Audience Question: Why not overfund your emergency fund by investing it in global stock index funds instead of leaving it in cash?
• Ben's Perspective:
  • He’s “torn” and sees both sides. The case against this approach is clear: “Why would you want volatility in your safe investments that require stability, liquidity, and flexibility?”
  • However, overfunding might hedge against inflation better than cash, and Ben admits, “I don’t have a huge emergency stockpile of cash... I sweep it into my investment account and I put it into stocks.”
  • Potential Issue: Behavioral difficulty of selling after a crash (“that could be painful to do... you’re locking in losses” — 03:18), and delayed trade settlement (“T plus two... you sell today, your money gets here on a Friday. What if you need that cash today?” — 04:42).
  • Advice: If you try this, hold at least a “get out of jail free card” amount in true cash for flexibility. Consider a split—e.g., 75% cash/25% stocks—but only for those who can stomach market swings.
• Duncan’s Take:
  • Wonders if Ben’s own writing about stocks usually going up longer-term justifies more risk-taking. Though he doesn’t fully practice this himself.
• Ben’s Bottom Line: It’s not a terrible idea for thoughtful, disciplined investors, but “match your assets to your liabilities.”

2. Required Minimum Distributions (RMDs): Timing Withdrawals

Timestamp: 07:10 – 11:03

• Audience Question: Best way to take annual RMDs — monthly, all at once, or time it for stronger months?
• Ben’s Explanation:
  • RMDs are government-mandated withdrawals forcing retirees to draw down tax-deferred accounts starting at 73 or 75, depending on birth year.
  • Math Perspective: Because markets usually rise, selling at the end of the year might allow for more upside, so “all else equal, you want to buy fast and sell slow... But some people can't stomach that for psychological reasons.”—08:38
  • Practical Solutions: Monthly/quarterly sales hedge against bad market timing (“averaging out is a hedge against bad timing or bad luck”).
  • Key Advice: “Pick a strategy you can stick with and not try to tinker with it... If you keep changing the intervals, that's the problem.” (10:54)

3. Is the 4% Rule Outdated Given Higher Interest Rates?

Timestamp: 11:03 – 12:17

• Audience Question (from chat): Why not raise the 4% rule due to higher CD and bond rates?
• Ben’s Response:
  • In theory, if yields rise, spending rules could too, but most don’t adjust in practice.
  • “There’s a lot of gray here... your spending will change. You’ll likely spend more in your 60s than your 70s and 80s because you’re healthier...” (11:49).

4. Paying for Home Improvements: HELOC or Cash Flow?

Timestamp: 13:01 – 18:43

• Audience Question: Should I use a HELOC (Home Equity Line of Credit) or cash flow/investments for major renovations?
• Ben’s Experience:
  • He and his wife are replacing carpet with hardwood floors (“my wife tells me it’s already out of style” — 15:12).
  • Chose HELOC for flexibility: “It allows these other investments to be left alone. It increases flexibility. And that’s what the point of the HELOC is for.” (15:29)
  • Tax Advantage: Interest on HELOC for renovations is tax-deductible.
  • Caution: Rates on HELOCs are variable (“ours right now is like 7 or 8%... not great” — 16:25).
  • Strategy: Only sensible if you plan to stay in the house for years; pay it off over several years for manageability.
  • Emotional Side: Most home renovations have a poor dollar-for-dollar ROI (“maybe 50 cents on the dollar if you're lucky” — 17:24). But that isn’t the point: “Because you want a nicer kitchen... do this once, rip the band-aid off, and then it’s there forever” (18:05).

5. Factoring Pensions into Retirement Planning

Timestamp: 18:46 – 24:22

• Audience Question: How do pensions change the retirement number or financial readiness?
• Ben’s Framework:
  • Pensions are incredibly valuable, often more than people realize. “Having a pension means they have way more financial assets than they think they do.” (19:43)
  • Treat pensions as a stable income stream (“start with their pension income and then you figure out how much they require from other sources” — 22:00), not a lump sum.
  • Lump-sum calculation is less useful—focus should be on income replacement.
  • Inflation Concern: Most pensions lack an inflation adjustment; retirees need stocks to maintain buying power over long retirements.
  • Best Practices: Once stable pension income is established, portfolio risk and withdrawals should be tailored to required additional spending.
• Duncan’s Clarification: Pension formulas may be based on a high-end average of recent years; most can’t pass on pension income to children (20:45).

6. Fiction Book Recommendations for Nonfiction Readers

Timestamp: 24:24 – 31:24

• Audience Question: What fiction series would you recommend for a “normal guy” who mainly reads business/psychology?
• Ben’s Book List:
  • Jack Reacher series – Lee Child: “Especially the early ones, is probably one of the better... the books are so good.” (26:43)
  • Spencer series – Robert Parker: “Probably the best wisecracking and kicking ass person that there is.” (27:20)
  • Joe Pickett series – C.J. Box: Modern-day Wyoming game warden; good underdog stories.
  • John Corey series – Nelson DeMille: Set in New York, “probably the most intelligent sarcasm that I can think of.”
  • Prey/Flowers series – John Sandford: Midwest detective fiction.
• Ben on Reading Habits: “I try to read a little bit every night... helps me go to sleep.” (30:09)
• Memorable Anecdote: Ben’s mother reads the last 10 pages of a book first!

Notable Quotes and Memorable Moments

• On Emergency Funds:
  “Half of my brain absolutely hates this idea. Hates it. But the other half of my brain is kind of like, hmm, this actually makes some sense.” — Ben, 02:53

• On Selling When Markets Are Down:
  “That could be painful to do... you’re locking in losses. I think that’s the whole point of holding cash in the first place.” — Ben, 03:18

• On Matching Assets and Liabilities:
  “I think you should match your assets with your liabilities. And that’s the problem: the stock market over any 12 month period, even over 3 to 5 years, it can be down.” — Ben, 05:55

• On Home Renovations:
  “Do you need to do this? No, it’s something we want to do.” — Ben, 18:19

• On Pensions:
  “Regular income in retirement makes planning so much easier than the opposite.” — Ben, 20:49

• On Retirement “Rules”:
  “Does anyone actually have a 60/40 portfolio or is it just something that we benchmark to?” — Ben, 11:24

Timestamps Overview

| Segment | Timestamp | |---------------------------------------------------------------------------|-------------------| | Opening & Episode Themes | 00:00 – 02:04 | | Using Stocks as an Emergency Fund | 02:06 – 06:48 | | RMD Withdrawal Strategies | 07:10 – 11:03 | | Should the 4% Rule Change With Rates? | 11:03 – 12:17 | | Paying for Renovations: HELOC vs Cash | 13:01 – 18:43 | | How to Factor Pensions in Retirement Planning | 18:46 – 24:22 | | Fiction Book Recommendations | 24:24 – 31:24 |

Overall Tone & Audience Value

The episode strikes a relatable, conversational tone, mixing actionable financial insights with humor and candid anecdote. The hosts lay out both sides of nuanced personal finance decisions, emphasize the need for flexibility and matching strategies to individual tolerances, and provide encouragement for creative, thoughtful planning. The lively fiction book segment caps off the episode and humanizes the personal side of money.

For First-Time Listeners

If you’re grappling with the timing of selling your investments—whether for emergencies, retirement distributions, or life upgrades—this episode gives both strategic frameworks and personal experience. You’ll walk away with practical ideas, thoughtful caveats, and even your next favorite fiction series to unwind between financial milestones.