I’m curious to learn how other investors here handle profit-taking strategies. I recently took some profits on a stock that was up +39% but noticed that my platform still shows the same profit percentage, even after selling a portion of my shares.
Given this, I find it challenging to know when I’ve hit my profit thresholds again. How do you track your gains and determine when to take profits? Do you use any specific tools, spreadsheets, or alerts to manage your strategy?
For reference I am a long term investor however I want a strategy that helps me realise profits for stocks that exceed a certain threshold and that I think the price might be short lived.
My ideal situation is when I notice a stock that exceeds 20% profit (e.g 28%). I want to pull money out of the position to reduce it back to 20%.
Looking forward to hearing how you all manage this!
I personally use a combination of various tools including stock events and dividend watch amongst others. With the latter you can record any sales and it is free to use for up to 10 stocks.
In terms of profit taking, this is really down to your own risk tolerance, investment horizon and personal preference. I usually trim from any individual position that exceeds 10% of my portfolio (excluding ETF’s) and is in the green. I also sometimes take any profits when over 45%, as my view is why cut unnecessarily from a strong position that is giving you good returns.
I will echo the sentiment of the other comment here and will also mention that your strategy should be informed by any number of tools and resources that you feel comfortable using to make sense of where you are and where you are heading with your investments.
Having said all that. My insight is a bit different and might help you. For me personally instead of thinking about “taking a profit” on a percentage per share rule, I much prefer shifting between my profitable entities and cash based values to maintain a predefined relationship that I am comfortable with.
Specifically
Let’s say that you are comfortable with a 50/50 split.
If at a point in time your account shows your shares pot as 60% and your cash as 40% I would be liquidating some of the shares to “restore balance in the proverbial universe” of your investments. It really doesn’t matter whether you decide to sell a losing position or you decide to sell a portion of a 30% gain. This is because a) you can’t predict the future and b) as a result you can’t be sure if that +30 is not about to be +90 or if the minus 30 is not about to lose another 90% of its value…
Ergo, all other things being equal the 60/40 you are seeing either means that over the preceding period you have been “depositing” more towards the acquisition of shares and less towards cash instruments. Or that your holdings have appreciated by some percentage or other.
If at a point in time your account shows the opposite example, ie that your cash is now 60% and your shares holding is 40% this could mean you’ve deposited more towards that “cash pot” or that overall your share portfolio is doing less well. In this scenario I would be buying more shares of a company I researched etc. by using my cash deposits.
Which shares you sell to materialise that profit should be a matter of your opinion and on the basis of what information you have about the company, its prospects, your own circumstances and a whole score of other data points as per how you go about your business. Hope the above helps