How to know when to take a profit

[TrophyHusband]

I bought $100K of Netflix (NFLX) in 2014 when it was $47/share. It is now worth ~$680/share. Over the years we have sold off some of the shares to lessen our exposure, pay off the mortgage and to purchase some investment properties.

Even though it'd be nice to have kept all those shares, the decision we made at the time was the right one. NFLX was becoming too big a portion of our portfolio so we diversified into less risky assets. Even now, after selling off 40% of our original shares we have about $1M of NFLX and it is about 20% of our overall portfolio.

For us, we took a profit when we started sleeping less comfortably at night knowing so many eggs ($) were in one basket (NFLX).

[2177V]

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Originally Posted by CatinKS I'm not talking about day trading or even any short-term gain, but a stock or mutual fund you have held for 10 years. I have a mutual fund that is about to double, and in the back of my mind think it is time. Realize might be other threads on this topic in the past. If so, just direct me to those.

For long term investments, I tend to buy and hold except for the rare times when There is a fundamental change in the market which may affect my long term investments and there is a better long term investment.

For a IRA you can make changes with much tax impact unless you withdraw. For taxible accounts, it is more complicated. You provide too little details on your investments, IRA or taxible, and your financial goals with this investments.

My short term investments tend to be speculation which is close to gambling. When I gamble at a Casino, seems like if I am ahead and quit early, I made money. If I continue to gamble, I seem to lose. Therefore I set a sell price and if reaches that sell price I commit to it.

[FIREarly]

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Originally Posted by CatinKS I'm not talking about day trading or even any short-term gain, but a stock or mutual fund you have held for 10 years. I have a mutual fund that is about to double, and in the back of my mind think it is time. Realize might be other threads on this topic in the past. If so, just direct me to those.

If it's TSLA, HOLD!! Unless you need the money.

[GoodLife59]

Mutual funds are set up to meet specific goals as described in its prospectus and use a diverse set of investments to achieve those goals. You’re describing a single issue stock style tactic. Do you work with a financial adviser?

[slatoid]

Like Tesla, that is currently disrupting auto and energy (or Apple when it introduced iPhone, or Netflix when it began streaming, etc…) sell it only when you need the money.

[m3bs]

I’m lousy at selling, but I’ve done a pretty good job of holding, and it’s paid off handsomely with AAPL, NVDA and MSFT, and several others. Recently I’ve been thinking about selling everything and taking my licks while CG taxes are still low, then jumping back in with a clean slate at the next big pullback. I would probably miss out on some gains if the market continues higher, but I don’t need the money now and I’m convinced the current administration is foaming at the mouth over those unrealized gains. I’m certainly not in danger of being a target of their billionaire taxes, but I figure the 15% CG rate won’t survive even a “moderate” tax policy change. I just hope they don’t make it retroactive….

[FIREarly]

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Originally Posted by slatoid Like Tesla, that is currently disrupting auto and energy (or Apple when it introduced iPhone, or Netflix when it began streaming, etc…) sell it only when you need the money.

The President's current Infrastructure bill looks to help the positive disruption even more. Tesla might be getting federal tax credits again!

Back to topic of selling stocks.

I recently sold all of my crypto before it rose again. Stinks that it went up more but figured it would happen at some point. Want to buy a RE property.

[RetiredHappy]

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Originally Posted by m3bs I’m lousy at selling, but I’ve done a pretty good job of holding, and it’s paid off handsomely with AAPL, NVDA and MSFT, and several others. Recently I’ve been thinking about selling everything and taking my licks while CG taxes are still low, then jumping back in with a clean slate at the next big pullback. I would probably miss out on some gains if the market continues higher, but I don’t need the money now and I’m convinced the current administration is foaming at the mouth over those unrealized gains. I’m certainly not in danger of being a target of their billionaire taxes, but I figure the 15% CG rate won’t survive even a “moderate” tax policy change. I just hope they don’t make it retroactive….

Ah, but if you never need to sell (most of) the positions, you won't incur CG. In our case, the plan is for our accounts to pass down to our heir and if the step up on cost basis remains, then CG is wiped off entirely.

[m3bs]

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Originally Posted by RetiredHappy Ah, but if you never need to sell (most of) the positions, you won't incur CG. In our case, the plan is for our accounts to pass down to our heir and if the step up on cost basis remains, then CG is wiped off entirely.

Hopefully that works out for you and your heirs. They are coming after the step-up provision as well, so I wouldn’t count on it.

[RetiredHappy]

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Originally Posted by m3bs Hopefully that works out for you and your heirs. They are coming after the step-up provision as well, so I wouldn’t count on it.

The wind changes with each administration. Who knows what the future holds?

[RobbieB]

I usually fund the new year in January. New year, new funding, adjusted for new year plans. Sorta, kinda, based on last year, say 80%. Not many surprises tax wise.

[Time2]

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Originally Posted by RobbieB I usually fund the new year in January. New year, new funding, adjusted for new year plans. Sorta, kinda, based on last year, say 80%. Not many surprises tax wise.

I have been funding the new year in Dec of the previous year since 2019. So I'm recently starting to calculate how much I will need. 2022 will be my last year to fund high tuition, but only one payment, I'll have about 5 months of rent payments for the kid. I want to fund the other kid's Roth and have my living expenses. On the income side, I have $10k of dividends/interest and I'm using $19k of saved up HSA receipts. So now I need to figure out how how much to remove from taxed funds and IRA to fund expenses and to fund my Roth IRA Conversion. And whether to stay in the 12% bracket or go to 22%, I don't think I can Roth Convert much and stay in the 12% bracket, so I may just take the big plunge and go to the top of the 22% bracket.



I don't want to pay taxes out of IRA funds, so I need to figure out if it make any difference to get some funds from LTCGs to pay the taxes. ??

[FIREarly]

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Originally Posted by Time2 I'm using $19k of saved up HSA receipts.

Congratulations, HSA is a great additional retirement tool! Save those receipts and prosper!

[jollystomper]

I agree with several others who stated they are not good at selling. I am the same way. In hindsight, what I could have gained by not selling far surpassed what i lost by holding on for "too long". So my approach is to rarely sell. And even then my "greed" has "cost me. My last individual stock sale was 10% of my MSFT stake in 2019, as a retirement "gift" to myself to blow that dough. I had bought the shares at the split-adjusted price of $4 in the 1990s, so why not sell some at $138 and have fun with some of it. Of course, the shares are now around $336. At least the gain has more than made up for what I sold .

So at this point, I am not selling. I will rebalance, but not automatically. I lucked out and rebalanced mutual funds in April last year, no so much because stock sere down, but to generate some some capital losses. I reinvested what I sold, and it was the right time to reinvest.

I have come to the point that with pension income, investment income, a large amount of cash, and SS not yet taken (and I will receive the maximum payment), I have no real need to sell. Any gains are for my estate. Any losses by holding are also for my estate, but my heirs will still be left with a lot of money. So, while I "never say never", I am just not thinking of selling these days.

[Chuckanut]

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Originally Posted by jollystomper I agree with several others who stated they are not good at selling. I am the same way. In hindsight, what I could have gained by not selling far surpassed what i lost by holding on for "too long".

Your not alone in noticing that. Some of the academic papers have pointed out that selling early is very costly. There's some interesting meat to chew on in the article below.

https://humbledollar.com/2021/09/the-cardinal-sin/

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But let’s say you’re really smart (or lucky) and happen to pick a fair share of the winners. You face another big hurdle. You must hold on to your winners and not sell them prematurely. Unfortunately, this is easier said than done. Most investors display a strong tendency to sell their winners and ride their losers. This has been termed the disposition effect, first described by behavioral economists Hersh Shefrin and Meir Statman. The disposition effect can be explained by mental accounting and loss aversion. When an investor buys a stock, a mental account is subconsciously created. The initial investment or cost basis is recorded in this account. If the position is subsequently sold for less than its cost basis, the mental account is closed at a loss. Since losses are painful—particularly to our egos—investors do everything in their power to avoid this from happening, hence the tendency for investors to cling to their losers and even double down on them.

[dixter]

well some of you know that I have all ways liked the Ford Corporate Bond issue that pays 9.98% .... well it seems its now time to let those go...
On Friday last week I got an email from Fidelity that I had a Important Voluntary Corporate Action... what ??
So I called them up and asked what the deal was and was told that Ford wanted to buy me out of my bond holdings... yep... the very same ones that I have held for years... they paid almost 10% every single year...
So I said OK so whats the deal...
if you take the deal before 11/17 you get an incentive of $50 per $1000 bond.. and add 3% on 11/19 plus the market value... so thats 8% right off the bat and the market value of those bonds just so happen to be at an all time high... $1708 per bond...
so it wasn't like I was planning on taking the profits as I did like that 9.98% coupon for so many years... so thats 78% profit added onto the ~10% coupon payments over the years ... the buyout is just too good to pass up...

[kgtest]

I sell if I am underperforming the market longer than 3 months...

Said differently, I sell after the anchor has been dragging in the muck, about to hit the coral reef ahead. But I don't do much individual equity trading these days and am in the accumulation stage. FWIW, YMMV.

[dixter]

I am seriously thinking about cashing out all investments and staying away from investing going forward...
you can get to a point where your investments are putting too much at risk for your own good....
right now the medicare IRMAA is $182K for couples.. and I don't plan on going over that amount yearly and what they adjust for in the future... so thats my target draw from my retirement funding instruments...
So you just take your accumulated fundings and divide that number by the $182K IRMAA and that tells you pretty much how long your funds are going to last... if the number comes up that its way past any date you or the spouse would live to .. then why put your funds at risk in an investment when you have more than enough... just a thought right now... but it sure is an option to take seriously, it may be time for the ultimate cash out

[REWahoo]

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Originally Posted by dixter I am seriously thinking about cashing out all investments and staying away from investing going forward... you can get to a point where your investments are putting too much at risk for your own good....

Use the Google forum search and check out the numerous threads containing the phrase "won the game". https://www.google.com/search?q=won+...retirement.org

[mickeyd]

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How to know when to take a profit

WWBS? Stay the course. Take what you need. Leave the rest to ride.

*WWBS= what would Bogle say.