Been out all day. Missed much of the action.
There's three types of people who take profit.
1. Traders
2. Insto's
3. Those who read/listen to various finance shows/podcasts and therefore take the advice from someone who does it for a living who 'advises' them (tells) them to take profits and trim.
On the 3rd point, these people who do it for a living have to justify their existence. Yet, you have absolute legends such as Munger/Buffet who have said time and time again over decades - don't interrupt the compounding process.
So you sell and take 10% off the table. If the stock price goes up - you've already lost thanks to crystalising a capital gain and your compounding on the 10% that you sold. Instead of having 1000 shares, you now have 900. The stock price has appreciated on your remaining 900 shares and not the 1000 shares that you initially held. There goes your compounding. Unless of course, you're absolutely certain that by "taking profits" that your next investment is guaranteed to compound as much as the investment that you took profits from in the first place, then how does it possibly make any sense at all to carry out this practice? Suddenly, you don't have as much conviction in a stock that you've researched, held and become familiar with - that your happy to skim and divert "profits" into the unknown? Kidding right?
If you're worried about your weightings, why don't you just either buy the index, a LIC or an equal weight ETF? or, just start diverting your capital into other individual holdings and bring those weightings up without interrupting those rare and highly sought after compounders? Or, why not just own those passive investments along with your compounders?
I mention all of this because I am continually bemused by peoples own lack of self confidence. Unless you need the money, then why take profits? If you think that the stock that you're invested in is now fully valued, then why not just sell it all and take your money and find a better idea?
I'll tell you why. It's those same people who are indecisive and don't have the conviction to be fully invested in what was initially a fantastic idea/investment who are scared. They're scared of missing out on compounding profits and they're also scared of losing. Either way, they're scared. They think that they're still in it. They think that "I can skim some profits and buy back in when the Share price falls". That's what Insto's tell you to do. I could name the professional individuals who trumpet this style of investing, but at the end of the day, they're just making a living from creating noise, indecision and quite frankly - bad professional advice. No wonder ETF's are so popular when there's paid professionals out there who are nothing more than total twits.
This whole "taking profits" is just a complete load of garbage that encourages people to trade, pay brokerage, taxes and for insto's to be able to say to their members (who they're ripping off) "look at our returns!". If you're a retail investor like myself and if you have enough conviction in a company that you've decided to invest your hard earned cash into, then why not stay the course?
I acknowledge that everyone has different objectives. Recently, I heard a professional investor/advisor say that the 'buy and hold' strategy was dead. They also said that passive investing was a waste of time. Doesn't that depend on your own personal goals, objectives and the type of businesses that you're invested in? Again, they're trying to encourage you to chop and change, to subscribe to their daily newsletter (because they know something that you may not) and they're encouraging you to trade.Apologies for the pent-up rant. I had to get that off my hairy chest.
And no. I won't be taking profits in my holding of Audinate any time soon. I'm quietly confident that in 10 years time, my kids (through owning shares in Audinate) will have a substantial deposit available to them to purchase a home. Should that occur, I'm going to send Aiden a Christmas card.
If you fall into points 1 & 2 (above) - simply ignore this post.
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