One of the most important lessons I’ve learned as an investor is this: when you have a great asset, don’t sell just because it goes up a lot. Don’t sell early if you think it starts to get expensive either, because it probably has a ways to go. Momentum is a strong force.
These days I wait a long time to sell a quality asset. I’m a patient investor. Whether it’s a stock, crypto or startup investment, I generally sit tight and hold.
I only consider selling when the amount I’d make is practically outrageous. And that opportunity has happened for me with stocks and crypto — and even with first edition books (a story for another time). But I never would have been able to attain those outrageous gains if I hadn’t held the investment for a good amount of time beforehand.
Needless to say, I almost never sell anything sooner than one year. That would be a short-term capital gain, which is taxed at a far higher rate. Holding long term also means avoiding high taxes.
And when I do start to sell, I usually slowly scale out of positions. I’ll start by selling 15% of my position. Then I’ll wait a while before selling 15% more. I don’t drop an investment all at once, because I’m highly unlikely to hit the price anywhere near its top doing that. When you scale out, at least you get an average price of sorts.
If you start with good assets, this model works. And I think it’s especially important in crypto. We’ve been holding a long time, and I think we’ve finally reached the point where it is OK to start taking a little profit. Just be sure to leave some — if not most — on the table.