1Wk·

Basics of Economics: Loss Aversion

Over the last couple of months, my portfolio has seen substantial growth. Valuations are generally at all-time highs. $GOOGL (+0.02%) has increased by approximately 9% since yesterday, and I still have confidence in this company and its business model for the long term.

However, since my portfolio is relatively small compared to most big guys here (+-10K), and I’ve made 30% on Google in less than three months, I’ve decided to sell a small portion of my Google holdings. My portfolio was heavily weighted in Google, with 20% of my investments in the stock. While it feels weird to sell, I believe that taking profits when valuations are significantly high is a wise decision.

How do you approach taking profits, especially when a stock constitutes a large portion of your portfolio and has experienced such a significant increase in share price?

6 Comments

aminemeskni@Aminmeskini

1Wk

If you want to build wealth, you dont have to sell a solid comp like google, wich still undervalued. Just buy other stocks

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DeBlaaspijpJager@DeBlaaspijpJager

1Wk

@Aminmeskini Yeah, you are right. I consider myself a value investor. However, do you then think 20% in 1 stock is okay in terms of diversification practices?

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aminemeskni@Aminmeskini

1Wk

@DeBlaaspijpJager it's no Problem at all

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Parker@Profitparker

1Wk

Looking 5+ years ahead, Google is well positioned to be a key player in the AI revolution and worth much more than today. Concentration helps you build wealth, while diversification helps you protect it. Let your winners ride !!

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jdb@Ultimate_Accumulator

1Wk

Hi, it is a great question but I think that you unconsciously answered it. If still have confidence in this company and its business model for the long term you just have to hold until you feel that premise becomes invalid - that is why it feels weird for you selling it now.

Diversify by buying stocks of other equally great companies.

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MatisseVerleye@MatisseVerleye

Hey! I get that taking profits feels safe and the right thing to do maybe? But you shouldn't trade based only on rising prices. Valuations are at all time highs, but this is not true for Google. The stock has been much higher based on fundamental analysis in the past. In this case the valuation has become more fair. I'll give another example, if you buy a stock that in your research is worth twice as much as the price right now, and it goes +50% in a few months, are you going to sell it? Or if you think your stock can go from today to within 3 years times 3, and in six months it goes +60%, you would want to keep it, right?

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