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.