I joined 212 early to mid last year, and given the way the markets have gone, and a spot of luck, I actually have a few stocks that have doubled in value, or there about if not more.
It dawned on me today, that I am generally a buy and hold, long term investor, so the market order system here is brilliant, but what if I started taking out my initial investment once my gains were + 100%, and then leave them as they were?
My gains could be reinvested in another stock, or put into a global equity tracker, with effectively some ‘free’ satellite holdings. Clearly if you buy £100 worth of stock at £1 a share, and they grow to £4 a share, you have £400 in value, so £300 in gains. But if you withdrew £100 when it reached £200, then you would only have £200 in profit when the price reached £4 a share.
If you believe in the stock growth, then clearly leave it in there, but taking out some profit does allow you to rebalance and diversify your portfolio.
Has anyone done similar - I’m not entirely sure where to start in terms of analysing this.
I have done this several times. I took all my initial investment out of Tesla in January and I’m just playing with house money now, this has helped with peace of mind but I’ll probably regret it in the long run. I did it with lemonade also but have since sold it all once I felt it was getting to a rediculous valuation
The problem here is you are trying to come up with a strategy to beat the market which is very difficult to implement in reality over the long term. You picked some winners but it is hard to repeat that over and over long term. The issue will come when you take the profit from your winner and buy another stock and this doesn’t outperform and goes down. Over time you will have some picks going up, some going down and it will level itself out over time unless you get very lucky. Even taking the profit from the winner stock and putting into ETF could me a mistake as its been proven that winning stocks keep winning. So anyway, welcome to the wonderful world of trying to beat the market long term, it ain’t easy!
Its not simply another ‘strategy’ to beat the market, as it allows more diversification of your portfolio and encourages long term investment. You could technically take a less active approach to monitoring your assets this way.
I know what you mean its about portfolio diversification to keep things balanced. But that’s a “strategy” in my book. Another “strategy” would be just to hold the stocks forever. Which of these 2 is better is debatable and would come down to your own comfort level. On one hand your method is safe and might fit someone risk adverse but for younger person with salary incoming it might be more advisable to keep winners to hope they win more with more risk in hopes of making it big
I take some profits but let the rest run. Especially with so many stocks skyrocketing I feel being greedy and not taking profits will bite me. Thats how I look at it. Taking profits allows me to stay flexible with cash since I dont have huge income each month