Should I sell my investment to lock in gains? A perspective.

A conversation with a reader:

Reader says...

Thank you for a great post again, this time with the Singapore Savings Bond, you always have a clear way to put it - your opinion vs general and helps people like me to make my own decision. 

I've been your blog reader for few years, and haven't written or comment at your blog for a while. 

I had bought into some Singapore Reits over the years for passive income, and this email I'd like to seek your sharing of experience in "selling" of Reits. 

I have a long term view for Reits, and keep it for income, but this particular one is putting me to a spot now - sell now or hold. First Reit. 

I bought it at around $1 and it has now appreciated to 40% and DPU is consistent for past years, they have further acquisitions and developments in Indonesia in upcoming future.  





But at this stage, at a capital appreciation of more than 40% , I'm considering if I should sell it off because I made this rough computation in my head as: 

with a 8% yearly dividend yield, if I sold off at 40% capital appreciation, it covers the next 5 years of dividend, and if crisis comes within these 5 years, I could then buy it again and accumulate again as passive income (provided all else remains equal that it is still a good company to invest in). 

But then questions put me at a stop - what if price never falls any much lower, how to calculate the $$ value of both options - hold and collect dividend vs sell off and buy back later at x $ price. 

Last week I met a several people at the AGM sharing about such problem or challenge in making decision - how to decide to hold and collect the dividend or take in the capital appreciation and put in the money somewhere else? 

A senior guy for e.g had bought in Ascendas when it was $0.60 and sold off at $1.50 and never imagined it would raise up to over $2 now. so he has no conclusion or idea why and when to hold or sell of a Reit. 

hope to hear more of sharing your experiences of strategies to sell and take in profit, and thank you in advance, for time to read this long post. :) 

AK says... 

Always question our motivations. 

Are we investing or are we trading?




If we are investing for income, if the investment is still doing the job we expect it to do, generating attractive income for us, then, there is really no reason to sell unless we feel that there is another investment out there that can do a better job.

As for wondering if the market will crash in the next 5 years, no one knows for sure. 

That is in the realms of speculation.

In the meantime, income generated from my investments fill my war chest. 




If there should be a meaningful decline in prices, all else remaining equal, I will be able to load up using my war chest.

Of course, for people who mix investing and trading, if a stock is up from $1 to $1.50, for example, they could consider selling two thirds of their investment to recover their capital. 

Their remaining position is free.

Don't mind me. I am just talking to myself.





Now the reader will start talking to herself. It is a contagious disease:

Reader says... 

Thank you AK for the response! 

I can always trust you to put it in clear steps and points. now my brain is able to do some talking to myself, after what you talk to yourself :D 

looking forward to your posts.

Related posts:
1. When to BUY, HOLD or SELL?
2. A simple way to a double digit yielding portfolio.
3. Singapore Savings Bond: Good or not?
4. Do not love unless it is worth the loving.

So, you want to be financially free too but wonder how?

This blog post is really written with one person in mind. OK, there could be others like him. So, it is written with him and his like minded buddies in mind.



On 17 May, I shared the following on my FB wall:

Someone who was introduced to my blog wrote to me to say that it is difficult to have enough savings for investment as his salary increments will at most keep pace with inflation.

Of course, I gave him the usual talk on wants and needs but he said that he couldn't reduce his expenses for various reasons. (AK doesn't really believe this but close one eye lah.)

Anyway, he felt depressed after reading my blog. Alamak!

Save 100% of your take home pay. What?

So, cannot reduce expenses, how? I asked him to read Chapter 3 of this free "e-book".

I could have just given him the link to that single relevant blog post but I want him to read these 7 chapters (i.e. blog posts) together. Yes, AK is sneaky.

Don't depend on wage increases for higher income.



Journey to financial freedom is not a race.

Yesterday, this person contacted me and said he has read the "e-book" and he thinks that people like me are just "plain super". He didn't think he would be up to the challenge. He was wondering if there were easier ways available. So, what's new? Duh.

I know that it always is the hardest at the beginning. This is true. However, it will get easier over time. This is also true. It is whether we have the courage to take the first step and the determination to continue putting one foot in front of the other. It is a journey. Nothing is going to change if we stay at the same spot, feeling too fatalistic to make the move.

Many people have told me that my blog has changed the lives of many people for the better. It is just that I don't know about them as most people are not as talkative as I am. It was only in the last 1 or 2 years that many more readers have come forward to share their personal stories of transformation with me. I am glad.

I would like to do something for this person who is still feeling depressed and others like him. I would like to share bits of several chats I had with another reader in FB in recent weeks:

From what I know, W is someone who has parents and young children to care for. I believe that his financial burden is not light but he has the courage and determination to take the necessary steps to improve his financial health with an eye on generating passive income to help supplement his earned income. 

His is a story of a hardworking ordinary Singaporean who wants and is working towards a better life for himself and his family.

Some people say that the grit that Singapore's pioneer generation had is barely visible in the Singaporeans of today.

They say that the "can do" attitude is dying. They say that Singaporeans are spoilt and have grown soft. There is some truth in all the statements but we have a choice.

We have a choice to prove them wrong.

W has made his choice.

You have to make yours.

Related posts:
1. AK's birthday wish was for everyone to be wealthier.
2. "I used to think that the PAP was eating our money."
3. Tea with Matthew Seah: POSB Invest Saver account.