Taking an inventory of how well you are doing on your investment is a good idea. It is advisable that you do this evaluation regularly so that if your investment rises to a certain profit range you can choose to unload the investment to cash out or to let it ride.
If you have an investment where the profits are up significantly from where you bought it, you’re doing good. Your investment can be your home, a rare coin collection or a high-flying stock and so on, you are in an envious position because we all wish that our investment has performed so well.
And since the investment has jumped up so much you may get tempted to want to sell and take your profits while you can. If you chose to do so, I wouldn’t blame you as there are some people who will liquidate their investment when they are up big in a heartbeat. When they do so they are able to lock in their gains and that is always good. For example, if their investment doubles in value they will cash out and take their profits without hesitation.
The people who decide to sell now and not wait until later, do so because they are afraid that the price of their investment may drop at some point. By electing to hold on to their investment too long their gains may be lost and that would be a mistake.
No one wants to be in a profitable situation at one point and later find out that their investment had turned into a loss. This can happen to you if you are not watching your investment closely. Plus, it’s a painful experience when a profitable transaction turns into a loss because you won’t forget that transaction.
However, deciding when to get out of an investment is by no means an easy decision to make. It’s a hard decision because we all want our investment to continue to go higher. We don’t like to let go as we believe that our investment has more room to grow which would generate more profits. If we elect to cash out too soon, which can occur, we will miss out on the opportunity for our investment to rise higher. This behavior represents that greed factor that some of us have and this strategy works sometimes and at other times it doesn’t.
However, in the world of investing, there is a chance that your investment can also go the other way. Instead of continuing to rise, you can lose money when the price of your investment declines. It is because of the uncertainty factor that is in all investments, that I’m suggesting that you should take some profits when you have a big gain. If the investment goes up 50% or 100%, you should liquidate the position to take your profits. You should do as investments go up and down and it’s impossible to time when it is best to do one over the other.
There is another choice, as you can sell part of your investment as a safe measure. You can cash out the amount of your original investment so that you won’t sustain a loss if the price of the investment drops. For example, if you had invested $25,000 and the investment rises to a value of $50,000, you will be sitting on a $25,000 market gain. In cashing out $25,000 you will walk away as a winner as your initial investment would be in your pocket, At that point, the remaining projected profit of $25,000 can stay in your investment giving it the opportunity for further growth.
However, there are some people who prefer not to cash out when their profits are up big. These individuals want to stay in their investment to see if it will continue to rise. You can choose this option but like in every investment, there is a high point and a low point. You are taking the risk that your investment will continue to go up and it may, but you have to consider that it may also go down. Hence, the time to sell or cash out is a personal choice and you need to know what is the best benchmark for you.to follow.
The key point of this article is to make sure that you think carefully about getting out of an investment when you have a large profit. It’s a hard decision to make but the experts suggest that it’s a good idea to take some of your profits while you can. You have to pay taxes on these gains, but it’s better to have profits and pay the taxes than to have a loss.
I prefer using the strategy to take some of my profits whenever my investment has risen up to a profit margin of 25 to 50%. This method has worked for me but you have to establish your own profit margin benchmark that is best for you. In the end, you must make sure that you go away making something on your investment because that is the reason why you are this game.
For those who own a stock, the dow jones index has just reached the record-breaking level of 21,000. This may be a sign for some of you to take some profits off the table so that those profits would be in your pocket. However, it’s up to you to make that decision and I hope this article helps you to do so.