Quote:
Originally Posted by toy71camaro
I was just about to type up that question... on the basis of what should us "small" investors do when we have gains (for example, my $1k purchase last year is sitting at $1.5k with a 50% gain. Do we scoop off the top and redistribute the $500 house money elsewhere, or let it ride).
Looks like you basically answered my question. Let it ride until its a "bigger stake". (or if there is another reason to sell).
But I just wanted to point that out to anyone else that was in the same boat of "what should i do...".
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Here's what happens when you sell your winners…. or sell part of your winners… You have to figure out what else to buy with that money --- and then you're getting less dividend which has a large impact on your compounding.
The GOAL here is to have the dividend buying ever more shares --- averaging in automatically --- and you get some upside capital growth along with it.
If you're constantly taking the paper gains off the table - you miss out on the compounding affect.
Now -- if you have 10K in ONE name ---- which means you should have 100K or more invested -- and you have a gain like the percentages you mentioned -- then to skim off 5K and add another name in the portfolio "might" be worth it. But you always have to be mindful of the compounding…
Now again -- I live off my gains and dividends -- I don't need (yes everyone really needs it) compounding… I need (want) the cash to spend… so I'm always skimming or trimming - or transferring the dividend (I do not reinvest it)… but I'm already retired and that's how I live.
What you're seeing -- which is a beautiful thing - is that you now have a 50% increase in capital -- in just one name!! Shortly it could be 200% or 300% -- and that's how this is ALL SUPPOSED TO WORK!! But it won't get there if you keep selling.
Let those winners ride --- and new money should go to new names -- because the more names you have the more likely you are to pick a few winners… and before long -- those winner are contributing MORE to your retirement plan than you are! Now that's a winning situation! That's what we're after..