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Friday, 28 November 2014

Mid term investing - is this okay?

Long term investor or passive income investor normally frowned at those mid to much shorter term investor as the latter are considered trading rather than investing. 

This pre-judged labelling on those shorter term investors as trader is really an injustice to them.  There are many reasons for one to choose shorter investing duration. 

It is okay to take the money off the table when an investment is already in a profit position.  How much profit is ideal?  No hard rules here as the profit target is different for each individual investor.  Just need to ensure that the greed feeling is in checked.

Going for shorter term investing duration is really making sure that the money is working much harder for you.  Most share prices fluctuate; one moment you will experience a huge paper gain but the next moment in a bearish stock market then it can turn into a much lesser paper gain and even getting into paper losses situation.  Need to lock in the profit so that it will turn into bigger war chest for future investment opportunity or immediate re-investment opportunity appearing at your doorstep.  So why wasting away that huge paper gain.

The bigger one's investable funds the much faster to richness.  So when one has a much smaller investable funds than is it a goner case?  Fret not; in a shorter investing cycle one can be assured that each time a profit is booked than the proceeds can immediately be deployed back into other equally good investment opportunity. 

3 comments:

  1. Opportunity costs is the main issue here and with limited capital, we all need to rethink of our opportunity costs.

    ReplyDelete
  2. Why do you pull the brake of a winner and let those losers running for you. On another view, it's ok to sell when it hit your target. There is no right or wrong. Just do what you want and blame no one.

    ReplyDelete
    Replies
    1. All the huge paper gain would get into a paper loss status in a bad market correction. So why not book those profits when there is a stock market recovery versus selling it during a bad market. All the realized profits can further enlarge one's war chest or be used immediately into other good investments.

      Now, l leave some paper gains there in my stock holdings which is a different strategy from the past. But l do not expect to keep them there forever and ever as you are not making the money working hard enough for you. l could missed out on some good opportunity investments if those paper gains are not liquidated.

      l am not into trading so l do not cut losses all the times. Bite the bullet only when it is necessary; and move on.

      However I do not really leave those losers in my stock holdings for many years (say, more than 2 years). l have suffered a few bad realized losses before. From the lessons learnt and believing in yourself, then making good those losses become easy.

      Delete

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