As the song goes, “you got to know when to hold’em, know when to fold’em”. The same goes for your “play” investment account. Buying low is easy but knowing when to sell is tricky. Here are three things I consider when analyzing whether to sell a highly appreciated investment.
First, what are the tax implications now versus 12 months from now. If the investment is in a non-qualified account, capital gains rates are low, especially if you’ve held for longer than a year.
Second, sell all but leave your original investment. If you invested $10k and it’s worth $100k, sell $90k and leave the rest.
Third, remember with speculation, you have to have parameters on what type of returns would cause you to sell. Stick to them!
Be disciplined and, most importantly, don’t look back. Please note, there are blue chip tech stocks that haven’t hit their 2001 highs, so it doesn’t hurt to take profits, especially now.
In the end, markets are fast, furious, and unrelenting. Don’t let greed cloud your judgement and realize you won’t get hurt taking a profit.