I was told that I have to constantly sell my stock then reinvest it to "lock in" profits. Is this true?

šŸ“Š Investing
101

I just donā€™t understand the purpose of selling and rebuying at same price point. That does absolutely zero % of impact.

If you had :apple: at start, they grow at same rate, you will still have same grown :apple: on end, but then scenario two is more :apple: to :tangerine:.

102

Iā€™ll come back with a pretty picture soon to state my caseā€¦ wellā€¦ Ciaranā€™s case! :wink:

Wellā€¦what I think is Ciaranā€™s case! :smile:

103

This will always be more, but itā€™s a different situation than 200% on Ā£100. Because you are doing 100% after 100% which is not 200% (itā€™s 300%, maths eh :person_facepalming:)

104

What youā€™re missing in these two example is the stock price. It also depends on how you add up those percentages. To compare apples to apples, you should focus on the growth of the stock price rather then growth of the investment.

Let say, that the price grows 200% from the initial investment (there is a difference between 100% and THEN ANOTHER 100% -> 1$22 = 4$ or 200% 1$*3 = 3$)

Scenario 1: stock price 1$ * 3 (200%) = 3$

  1. bought 100*1$ = 100$
  2. at the end value of my investment is 100*3$ = 300$

Scenario 2: stock price 1$ * 3 (200%) = 3$

  1. bought 100 shares*1$ = 100$ in value
  2. then I decide to sell on 2$ -> 200$ cash
  3. I buy 100 shares back 200$/2$ = 100 shares
  4. price is up to 3$, value of my investment is 300$ just like in scenario 1

For me, the difference is just psychological :slight_smile:

105

the fun comparison:

scenario 1: 1 +1 +1 =3
scenario 2: (1 x2) x2 =4

106

I spend 15 minutes and 4 paragraphs explaining it, but this works just as fine :smile:

107

Right, and this is precisely my point. It all comes down to whether a stock has legs to overperform in that way but what Iā€™m saying is, using NIO as an example, if I sold my holding after my investment reached 100% and immediately put the full amount back into it and it gained another 100%, the end number is higher than had I just sat on it to let it run the full 200%.

108

:point_up:I had assumed someone was comparing Nio to Tesla, now I know why :rofl: for the record, Joey is assuming the the realised profits are the ā€œfull 200%ā€ when in reality its more like 300%. either the stock goes up 200% or it goes up 300%, in both cases it doesnā€™t matter whether you realised or not. your final gains are the same.

109

:grey_question: :question: :grey_question: :question: :confused:

Now that doesnā€™t make any sense to meā€¦

110

Iā€™ll be back shortly.

Iā€™m not crazyā€¦!

:neutral_face:

111

Well I ainā€™t saying you crazy, but err I still donā€™t get why selling is mentioned in scenario as only relevance is % performance of stock.

So basically we have parallel universe.

Universe 1 it runs 100% from initial X value ,then runs again 100% from Y value which is X +100%
Universe 2 it runs 200% from initial X value

Selling in either Universe doesnā€™t have any relevance, so I donā€™t understand why mention it.

112

Not sure I have had enough coffee to understand these posts fully haha

113

I think you need more then coffee to fully understand the Author. :leafy_green:

114

Ouch!

Okay try this - hope it clarifies;

image
image898Ɨ146 4.83 KB

So as not to incite a riot, letā€™s say the stock is BABAā€¦ :wink:

115

The stock price is different at the end

116

Exactly. So youā€™re getting 100% more growth in a bigger portion.

If it continues growing of course.

117

As denoted by the percentage changes

118

That still makes zero sense, not same universe.

119

Please elaborate, mate. My whole reason for starting this chat up again was to understand whether Iā€™m misunderstanding and, if so, in what way. :+1:t2:

120

Because the price of underlying asset is not identical.

In scenario 2 price increases on higher clip , thus the stock value is higher then in scenario 1.

Selling did 0 in the grand scheme.