The Best Investment Advice I Ever Got: “There’s No Safe Long Term Bet, You Gotta Sell Your Profits.”
By: Anupam Chugh
Tags: Investment, Finance, Money, Stock Market, Investing

The Best Investment Advice I Ever Got: “There’s No Safe Long Term Bet, You Gotta Sell Your Profits.”

This one line changed my entire mindset towards investing

Photo by Tierra Mallorca on Unsplash

Today, it’s no mystery that we are in the biggest bull run of history. Despite economies in shambles, increasing unemployment rates, and uncertainties around the vaccines and stimulus, the stock market has reversed from the March lows to an all-time high in November 2020.

A set of people who had dumped their money into stock markets when the pandemic began have easily doubled their investment portfolio. At the same time, a different bunch of people who were skeptical to invest earlier are now loathing themselves and living in FOMO(and yeah, this group of investors includes me).

As the current stock market in a state of euphoria, it’s really a tricky time to start investing.

Some analysts say that the current bull run is unsustainable, and we’re about to see a sharp correction. But then, the optimists are proclaiming that there’s still a lot of room and nothing is over just yet.

With so many contrasting opinions, the decision to start stock market investing becomes really tricky — especially for newbies.

There’s always a fear that the world could enter into a bear market at any moment.

This dilemma got into my head, and I rang up my uncle, who's been a stock market trader for over two decades now.

My question was simple: Tesla, Palantir, Zoom, and a bunch of other tech stocks have skyrocketed and at least tripled in the past few months despite very little to show on paper. So, how do I plan my future investments when I already see my portfolio up 50% in the last one month?

And his answer was simple:

There’s No Such Thing As Long Term Investment. You Need To Take Out Your Profits From Time To Time.

I was shocked. Despite being new to finance, I’ve always known that compound interest is the most underrated force in the world. Also, time in the market always beats timing the market. So why would anyone advise to take out profits and not park my money for the long term?

Again, my uncle’s philosophy gave me a totally new perspective. His idea was straight. We invest money in stocks only because they give better returns than bank savings, mutual funds, and other instruments.

When you’ve already beaten the market and achieved a 50 percent return from a stock, it’s crucial to sell some profits and keep cash in hand. Cash is everything.

By pulling out profits, you’d have better peace of mind tomorrow as you’ve already booked some returns. More importantly, an investor won’t regret not selling the stock earlier when it eventually drops someday.

Nobody really knows what the future beholds for a stock, so it's always better to take out small profits and reinvest them when it feels right.

The key to successful investing in a volatile and irrational market is to think both like a trader and an investor. After all, a successful trader builds astonishing wealth from a small capital.