Question

What are two motivations to sell an asset, even if the current value is less than what you paid for it?

Answer 1

Answer:

two motivations to sell an asset, even if the current value is less than what you paid for it, are:

1. You want to buy new assets that are performing well currently.  

2. You want to diversify the types of assets that you own.

Explanation:

Asset management needs to implement measures in order to administrate risk. When you have an asset, whose value is less than the price you paid for it. Selling this asset becomes a logical decision when you either want to diversify your portfolio or buy a new asset that has a better performance in the market.  

Diversifying a portfolio is very important to avoid market risk. Having all your eggs in one basket is never a good investment decision because if something goes wrong with that particular investment your losses will be greater. For this reason, is always a good decision to keep different types of financial assets that help you to divide the risk among several assets.

Besides, if the current performance of a given assets is way better than an asset that is currently giving you no return in the investment because its actual price is less than the price you paid for it.