Knowing when to buy is the skill most investors focus on. Knowing when to reduce exposure is the one that tends to matter more. According to a 2024 DALBAR Quantitative Analysis of Investor Behavior report, the average equity investor underperformed the S&P 500 by 5.5 percentage points in 2023 — a gap driven primarily by poorly timed exits and re-entries rather than poor security selection.
Meanwhile, with the S&P 500 still trading at historically elevated valuations — a CAPE ratio of approximately 37 as of mid-2026, according to data from Yale economist Robert Shiller — the question of when and how to take profits has rarely been more relevant for advisors managing client expectations through a period of stretched asset prices. Three portfolio strategists explain the signals they actually use, and what they deliberately ignore.
Mike Finnegan, chief investment officer at Prairie Wealth Advisors, draws a clean conceptual line between two distinct categories of sell decision.
The first category is investment-driven. The most common triggers are a disrupted thesis — when the secular trend or competitive advantage that justified the original purchase no longer holds — and valuation stretch, where price appreciation has pushed expected returns below the level that compensates for the risk being taken. Importantly, Finnegan excludes volatility from both categories. Drawdowns, he argues, are not signals. They are costs — and investors who understand that before a drawdown occurs are far less likely to mistake ordinary turbulence for a structural problem requiring an exit.
The second category is client-driven: a change in the investor's goals or financial circumstances, such as an approaching retirement date, an unanticipated need for greater income resulting from job loss, or a change in marital status. These are equally valid triggers for exposure reduction, but they operate on a different logic than investment thesis evaluation.
"When an investor understands, before a drawdown occurs, that a 15% decline is part of the cost of the long-term return, they are far less likely to mistake ordinary turbulence for a reason to abandon the plan. We are not offering a smooth line — we are offering a disciplined, repeatable process that seeks to minimize volatility and avoid large losses so returns can compound over time," Finnegan said.
Finnegan manages the risk of large losses through a combination of diversification across uncorrelated return sources, disciplined position sizing and systematic trimming, and a suite of liquid tail-risk strategies and structured investments designed to protect against severe drawdown scenarios. The goal is not to eliminate volatility — it is to ensure that no single position, sector, or asset class can jeopardize the long-term plan.
Aaron Cirksena, founder and chief executive officer of MDRN Capital, makes his sell decisions based on two observable inputs: valuation and risk level.
What he deliberately excludes is equally important: headlines, television commentary, and market predictions. Every investment he holds, he says, was purchased for a specific reason — and when that reason changes, the investment thesis changes with it. The challenge is maintaining discipline on the exit when emotion, whether fear or hope, is pulling in the opposite direction. That is where his partnership with Potomac Fund Management adds structural value. Potomac's quantitative process gives Cirksena a second layer of discipline, making decisions based on what markets are actually doing rather than what any forecaster believes they are about to do.
"If you can avoid some of the big losses, you don't have to spend years trying to recover from them. That doesn't mean we're constantly moving in and out of the market. It means we're paying attention and making adjustments when they make sense. The best conversations happen before I ever have to sell something — we spend a lot of time explaining how we make decisions so it isn't a surprise when it's time to reduce exposure," Cirksena said.
Cirksena's broader client communication philosophy around exits reflects a principle that all three advisors in this story share: the time to explain why exposure might be reduced is before the reduction happens, not after. Advisors who have had that conversation proactively find that clients are far more receptive when a sell decision is implemented — because it confirms a framework they already understood, rather than announcing one they are encountering for the first time under stress.
Neal Albritton, lead advisor and owner at Albritton Financial Services, monitors both market-level signals and client-specific timelines when deciding to trim.
On the market side, he watches for valuation extremes — elevated price-to-earnings ratios relative to historical norms — combined with institutional sentiment indicators such as historically low cash reserve levels at major funds, which can signal that the market is broadly overextended rather than selectively expensive. When those signals align with a client entering their retirement income window, the combination triggers an immediate de-risking decision: reducing overconcentrated growth positions, locking in gains to fund near-term living expenses, and leaving the remaining capital fully invested for long-term compounding.
"We're not abandoning growth; we're taking profits. We show clients visually how locking in gains today shields them from being forced to sell depressed assets during a future market drop. Framing the conversation around the client's real-world cash flow needs rather than market fear transforms taking profits into a proactive, empowering strategy," Albritton said.
The structural framework Albritton uses is what he calls the Lifetime Income Model — a time-segmented approach that separates client assets based on when they will actually be needed. Near-term income needs are funded by the de-risking exercise; longer-term assets remain aggressively invested with a 15-to-20-plus-year runway. The model's purpose is to eliminate sequence-of-returns risk for income-dependent clients without forcing unnecessary conservatism on the portions of the portfolio that have the time to recover from volatility. In his framing to clients, reducing exposure is not market timing — it is systematically moving money into the appropriate time bucket based on a plan that was agreed upon before any market event occurred.
Taken together, the three advisors describe a sell discipline that is systematic, thesis-driven, and client-goal-anchored — and that treats volatility as data rather than a trigger. Whether the mechanism is institutional research, quantitative signals, or time-segmented buckets, the common thread is that the decision to reduce exposure is made within a framework that was established and communicated to clients before any specific market event forced the conversation. That is the difference between a disciplined exit and a reactive one.
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