Sunday 1 May 2022

Regrets not taking profits and how my investing thesis is going forward | Still continuing my DCA and if not, hold on for the ride

This has been in my draft for awhile so it might not really match the current context where the market has recovered and is on an upward trend or maybe not seems the market is so volatile. But I still want to release it as it was something that I learned from when the markets bottomed so let’s get into it. When the market hit bottom due to the war and then had a rather sustained low period, I was actually thinking why I did not take some profits previously, I know that an important aspect of investing is to know when to take profits. 


I don’t have the habit of doing so as I am not sure where the profits can go to but in the face of such a volatile market and knowing that 2022 was going to be a volatile year due to the interest hike and parabolic markets in 2021, there were quite a few opinions about taking some profits first and getting in later.

Read more: Q1 2022 Portfolio Review | On a roller coaster ride

How I felt when the markets bottomed

I guess we all expected 2022 to be a downward market as 2021 was a huge year for stocks and crypto with stimulus from the government and many working from home coupled with riding the investing wave + FOMO on reddit and twitter on profits from investing. But no one expected the war which is causing inflation to accelerate even more. For me, I wasn’t planning to reposition my portfolio as I was expecting the interest rate hikes which to me wasn’t until some time into 2022.

So when I saw the market nosedived in early 2022, I was pretty shocked mainly at the value of my portfolio haha, there was some disappointment seeing it drop so rapidly. But overall, holding most of the blue chips/L1 in crypto helped cushion the drop. My stocks on the other hand, having Tesla as the largest holding did fluctuate a lot. I saw many tweets on how most of them had restructure their portfolio to holding more cash or stablecoins to buy in when the markets dip further. I was also contemplating as I do have to admit that I am low on cash as well as not having a huge war chest. Having a portion of ammo on the side definitely helps.

Do you really need to take profits?

But if I were to reposition my portfolio and hold more cash/stablecoins, there will be another headache for me, which is, when is a good time to start going in again? I haven’t really done much lump sum investing as DCA has been the way I do my investing. DCA eliminates the thinking when to go in as I know I will constantly be buying again next month. With a lump sum, of course, you might not be able to get the absolute bottom but your entry point is also pretty important. I did sell off my SG stock holdings overall at a profit and moved them to stablecoins but they are a small proportion. 

Read more: Diversify or not to diversify | How are you structuring your portfolio?

I have to admit that I was pretty bummed that I did not cash out some profits from my winners as I saw the stock market went lower but to be honest, my profits are not huge and it is quite segregated within different holdings. I will still continue to DCA into my current holdings for months to come. Maybe if I were to have profits in the 5 digits and 6 digits in each single counter would I consider taking profits to wait for the next “best” time to get in. But all in all, I think it is great and good practice to be taking profits and to roll it on to other better counters, there were numerous times when I wished I took profits (like when Tesla reached $1200 and when we had BTC at $60,000) but to be honest, a that moment, I thought it would go higher.

No best way but use the most comfortable strategies for yourself

For me personally, taking profit is not really a priority in mind and it is what makes and break my portfolio. I have held onto losers, learning to cut losses recently but have held onto my winners ever since the beginning. I think taking profit applies to different individuals, as I apply DCA to my buying, I find it hard to take profit as I contribute a small sum to build up my various positions. Next, most of the positions I initiate are for the long term and so taking profit don’t seem to be on my mind. However, seeing this market dip and volatility does make me question if I should be so fully invested as I am not able to take advantage of the dips.

Read more: Why I have decided to allocate about 20% of my crypto portfolio to stable coins and earn interest

But when I do see significant dips and I am unable to initiate a position as I am fully invested, it does seem like a pity to me although this can also be solved by building up a war chest. I guess with limited cashflow, this is what I will face. So definitely means an increase of income is the best way forward. I am also trying to not be so involved in looking at prices and thinking so much since I do also have limited funds, not like I am able to capitalise on every dip. I am doing this by moving my apps or portfolio trackers all the way to the last page on my phone (to remove that easy access).

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