Profit taking, page-90

mate, congrats for getting into share ownership and for having some paper gains on the books. But just remember they are paper gains. They don’t mean anything til you’ve sold and made some profits. I’m going to tell you some stuff that more experienced people have taught me and that I wish I’d know when I first bought shares back in 2013:

1. Figure out your sell discipline. 98% of articles and advice is about what to buy. Very little is about what to sell. When I say sell discipline I mean figuring out what events or share prices will cause you to sell. What happens if you don’t do this is you become paralysed when events happen and you start lying to yourself “I’ll wait til it goes back up a bit and then sell” “I’ll sell if it drops another 10%” but in practice you never do and become a spectator. Very few stocks like afterpay will halve then bounce back to the original price (let alone blow well past it)

2. Write it down. Seriously. On paper, on the notes app of your phone, doesn’t matter. Every time you buy a stock write down what price or event would cause you to sell it. When a stock goes down it’s called a stop loss. When it goes up it’s lockong in profits. Doesn’t have to be fancy. And it doesn’t have to be all or nothing. Sell half, sell a quarter, whatever. Something I used to do was selling half if a stock doubled. That let me enjoy some gains. I also sell stocks if they decline 25% below the price I bought them. Avoiding losers is more important than finding winners but it’s way sexier to talk about buys than sells. If you get 6 or 7 out of every 10 calls right you’re a successful investor.

3. Understand yourself. I’ll give you my examples. I’m shockingly biased. I love a good story and let it cloud my judgement so hold stocks too long and don’t lock in gains. I find it hard to let go of my past analysis so I’m slow to sell when information that should change my investment thesis comes out. I’m a gambler. When a stock goes down my first thought isn’t “protect capital” it’s “buy more”. Figure out what you do wrong so when your lizard brain takes over your rational human brain can come back, realise what’s happening and take back control.

Message me at [email protected] if you have any other questions. Happy investing.