Should I Take Profits And Sell Stocks? You Can Never Lose If You Lock In A Gain

There are growing concerns that the bull market has come to an end in 2024 and it's now time to take profits. 

Downturns seldom ever last for just 6 – 12 months. It's never worth raising some cash to live to see another day. I finally sold my rental house in San Francisco that went up 60% from 2012 to 2017. That is nuts! I cashed out at $2,740,000 after buying it for $1,525,000 in 20014. With $1,800,000 in cash, I'm feeling GREAT!

Here's how I reinvested my proceeds. I'm all about making sure my profits last forever, or at least for as long as possible. The post below was written in 2012, and it goes through a thinking process I had about whether to sell stocks. Amazingly, the stock market has reached all time highs in 2017 and will likely stay elevated for a long time to come. 

A Recession Looms Once More: Time To Take Profits

1) Pain at the pump. Gas now costs $4.52 for premium unleaded.  As a result, it costs over $90 to fill up Moose.  Now that is pain, especially since the snow season in Tahoe is finally getting really good.  If I feel the pain only driving 7,000-8,000 miles a year with my income, and the average miles driving is 50% higher, I know others are feeling the pain as well.

2) Interest rate ramp. The 10-year yield is back down to 2%, signifying a tremendous slowdown in the economy.

3) Rental increases.  As a landlord in San Francisco, I am intricately aware that rents are on fire in the city.  We are talking a 15-20% increase in the past couple years thanks to all the tech/internet money and jobs flowing into the city.  Rent is always a huge portion of one's discretionary income, and if that is being squeezed, other things are getting cut down.  It's not just SF, but other places such as New York City where rents have gotten aggressive.  The rent trend starts in the big urban centers and flows to the rest of the country at different magnitudes.

4) Market valuations.  You can value the S&P 500 in any which way you want. Trailing Twelve Months, forward earnings, a composite, and so forth.  The market is fully valued.  We're not in a bubble, but a lot of earnings expectations have to be met in order for the party to continue.  Remember, the market discounts all news, good or bad, 6 months+ in advance. Taking profits is tempting.

S&P 500 valuation compared to 10-year bond real yield

5) Labor market.  Although the unemployment rate is heading to under 8%, it's clear that we aren't creating enough jobs (250,000+) to win back all the jobs lost over the past 3.5 years.  We have unemployment benefits that pay $1,850-$2,100 a month for almost two years, and people dropping out of the labor force because they've given up.  The labor market is improving, it's just not improving as much as I'd like for a +12% YTD performance by the S&P 500.

Here is a recession preparation checklist to protect yourself.


My number one goal is not to lose money. If I cannot make money, I sure as hell will do everything possible not to lose money. It was painful to lose ~35% of my net worth during the 2008-2009 collapse. I am all about capital preservation, and you will be too when you build your nut to a level which you deem as retirement worthy.  Losing 10% on a $100,000 portfolio stinks, but it's not that much at a $10,000 loss. If you lose 10% on $1.5 million, that $150,000 loss is painful for anybody, no matter how much you make.

When someone says, “I crushed the market and am up by 50%“, make sure you ask what's behind the curtain. If their portfolio is $25,000, seriously, who cares.  Ask them about their 5 year or 10 year track record. Ask them for their reasonings for why they think the way they do if they can't discuss amounts.

I admittedly have a low hurdle, which is to return 2X the US risk free rate of return. That's the 10-year government yield, which currently is at 2.35%.  2X 2.35% is around 5%, so that is my hurdle return for new money. I'm not greedy. I'll take a 13.5% guaranteed return any day, every year for the rest of my life!  I can't predict the future, nor do I claim to know anything about Kim Jung Il's death in 2011 back when I wrote the prediction in December, 2010.

All I know is that you can never lose if you lock in a gain! Taking profits is normal.

Invest In Private Growth Companies

Consider diversifying into private growth companies through an open venture capital fund. Companies are staying private for longer, as a result, more gains are accruing to private company investors. Finding the next Google or Apple before going public can be a life-changing investment. 

Check out the Innovation Fund, which invests in the following five sectors:

  • Artificial Intelligence & Machine Learning
  • Modern Data Infrastructure
  • Development Operations (DevOps)
  • Financial Technology (FinTech)
  • Real Estate & Property Technology (PropTech)

Roughly 35% of the Innovation Fund is invested in artificial intelligence, which I'm extremely bullish about. In 20 years, I don't want my kids wondering why I didn't invest in AI or work in AI!

The investment minimum is also only $10. Most venture capital funds have a $250,000+ minimum. In addition, you can see what the Innovation Fund is holding before deciding to invest and how much. Traditional venture capital funds require capital commitment first and then hope the general partners will find great investments.

70 thoughts on “Should I Take Profits And Sell Stocks? You Can Never Lose If You Lock In A Gain”

  1. Hi Sam,

    i’m 20 years old and want to start investing money in the stock market. Are there any articles you would recommend on where to start? I’ve already read the growth versus dividend article but I also want to know what sites I should frequent to actually obtain stocks. Thanks.

  2. Anonymous Student

    Probably the most difficult thing about locking in gains is: A) the prospect for even MORE gains and B) capital gains taxes. But you’re right about one thing, paying a 15% tax on capital gains is better than seeing 50% of your principal wiped out when the market tanks.

  3. I get your point but I think it is difficult to time the market.

    As others here have stated I get how you determine when to sell but the question is how do you determine when to get back in? If we could always time the market perfectly then we should get in the money management business since that model is easy to scale and if you could consistently generate positive returns you’d get very wealthy from all business you would attract.

    1. I look at valuations, market expectations, and economic conditions and make a judgement call when to get back in. Everything is relative.

      If I’m up 12%, lock in gains, and the market pulls back 5% after being up 11%.. I can buy the entire market, and lock in a 6% outperformance for the year, no matter what the market does.

      I can’t time the market perfectly at all. I just have my own expectations and so should you.

  4. Hi, I know that I would almost certainly be happy and sell with the 12% in gains, and I’m not sure if this question was raised earlier…but when does this mean you will buy back in, sometime next year? It just doesn’t feel intuitive that, with the goal of earning ~4-5% per year, one could invest in the mentioned stable value fund, which returns less than your desired gains. So I suppose my question is, why is your timeframe of judgement equal to 1 year. Why isn’t the goal to return 1-1.25% every quarter?

    Further, I understand selling due to the expectation that the market will go down, but I just can’t grasp the concept of selling solely to lock in the gains. With this article being written on March 15, why not start a new period of judgement at the time of writing, and try to earn 4-5% before next March 15 instead of ‘losing’ for 9 months?


    1. The stable value fund of 2-2.5% would not work if my starting point of the year was 0%. It does work with my starting point at 12%, leading to a 13.5% gain for the year.

      It’s up to each of us to figure out what we are comfortable with, and our investment horizon.

      How have you done YTD, and what is your strategy?

      1. ooh thanks for the reply.

        i’m currently writing the strategy. i’m 22, searching for a first real job, and trying to figure out how to best invest my current assets.

        but going back, i guess i just can’t phrase it correctly…but doesn’t it seem counterintuitive that youre locking yourself into this relatively losing (drawn out for a year it wouldn’t meet your annual goals) rate for such a large part of the year? it seems so limiting to try to beat the market over an arbitrary timeframe.

        say, if your timeframe of reference were 6 months, with a goal to return 6%, would you really just sell to ‘lock in that gain’ let’s say in february while you still believed the market would go up in march?

        i guess i’m trying to say that you really are losing by locking in that gain, if the purpose is solely selling to lock in the gain.


  5. Don’t know if you’re still replying to this post, but I have to ask: What are the tax implications of taking everything out? How does that impact your returns?

  6. Did a quick check…past 45 years market was up over 12% about 19 times.
    This surprised me. I think we have 4-5 more points to go. The quarter isnt over yet.

    1. Sure, I can see the markets going up 5% as I wrote in my post. But, if I miss it, fine. I can lock in a guaranteed 1.85% return through the end of the year on top of my 12% current return. I’d rather sleep well and focus my efforts elsewhere.

      Thanks for checking though!

  7. 101 Centavos

    Take the money and run. As a business mentor used to say to me, the primary goal of a company is not necessarily to make money… it’s to stay in business. With money in pocket, you stay in the game.

    1. It does, but nobody knows for sure. I do plan to buy back aggressively if the market drops b/c i am bullish over the next 3 years.

      I just think the market has gotten a little ahead of itself, and that real estate is incredibly attractive now.

      1. Yes, it is. I’d love to buy a home to rent, but I hear many new apartment buildings are going to be built soon as there are so many people wanting to rent. A person has to know their area.

  8. Ummmm…..welll, maybe.

    Taking profits may be a good strategy, so long as it does not become a case of taking profits too early and letting the losses run. That can leave you with a series of modest realised gains and much larger unrealised losses – net result is a disaster.

    FWIW, I have increased my allocation to cash this year as the rally has progressed. That said, given that inflation is higher than bank deposit rates, I’m not a fan of holding too much cash for too long.

    1. I have some pretty tight stop losses on the downside as well eg -10%, -15%. But really, I just take bets on the overall market and no longer specific stocks. I should probably have just a for fun fund, but I know I can’t pick stocks well.

      How long have you been investing and how have you been doing over these past treacherous 10 years?

  9. My step father is mentoring me so he said to me today never be afraid to take the chips off the table. You can never lose if you take a profit. 50 years of success and climbing.

  10. It’s an interesting plan, and it’s worked out well for you before. But it raises so many questions. Is January 1 the best time to get back in (barring a big drop in summer)? If markets do rise 10% do you get back in at all? Is a year the right period to evaluate the results? You’re right that there are risks everywhere and over a single year the risks to cash are probably relatively small. Do you ever do more gradual changes?

    If you have a portfolio big enough to retire, why not put a large piece of it in a safe and balanced allocation and then take the rest for long-term growth? Then neither piece needs constant monitoring and if absolutely needed you could cover your expenses without touching the growth part.

    1. The only thing “safe and balanced” to me is CDs or the stable value did I did invest in that has a 2.5% “guaranteed” yield which will bring my total gain to 13.87% for the year.

      Lots of questions indeed which I ignore bc the target return has been achieved.

        1. Yep, no problem. Check out my 2010 and 2011 predictions posts as well to see how those went.

          How long have you been investing and how have you done these past 10 treacherous years?

        2. First investment was in late 2007 :) We put a lot into bonds to save up for a down payment, so by the end of 2010 I think it was up by 10-20% total. The stocks were up too so I included those in the down payment and started over in the investment portfolio.

          Since then the return compared to the amount invested stands at 4.5%. If you count the new contributions the portfolio has grown about 1000% in the last year. That makes it a bit harder to measure returns but from watching the changes over the last few months, the investments that were there at the start of the year are probably up 6-8% so far this year. Slow and steady gains work for me.

        3. Mate, just tried commenting on your site and it said my e-mail is registered to and I need to sign in. Never seen that before, and doesn’t let me comment. Might want to change your comment system. thx

  11. After College Money

    Hey Sam,

    I also think it is a good idea to sell now. A 12% gain is great and it is smart to lock in such a high gain. I don’t see the stock market going much higher, and I believe that some time in 2012 the market will be cheaper than it is now. You said it best with this statement:

    “Do I think the stock market can rally another 5% higher from here? Yes. Do I think the stock market can rally another 10% higher from here? No.”

      1. After College Money

        Yes, I did lock in my gains! I’ve switched to cash and bonds. I am doing a defensive strategy until the market prices drop and I can buy things for cheap again. Who knows when that will happen, but I am patiently waiting…

        Although, I do agree with you and the market could break upward. If it goes up 20% then hey, everyone will be happy and therefore I will be happy.

  12. Because deep down I am bullish, as I have been bullish since mid 2009. It’s all a relative play. If the market corrects 5%, I am now 7% ahead of the market. Hence, if I put all my money back in, no matter what the performance is for 2012, I will always be 7% ahead. Right now, I’m just 2% ahead.

    1. I really am scratching my head if there are still believers out there who believe a Republican will win this year. Unless there is a scandal or death, Obama will get re-elected and I’m willing to bet any amount of money… well… up to Mitt Romney’s $10,000 :)

  13. It is indeed. I’m selling equities in all accounts. If I could sell my company equity now I would too. I’ve seen so many funds have banner first halfs, only to trade themselves to misery. So yes, I’m calling it a year right now and focusing my money making efforts elsewhere.

    13.5% is not bad.

  14. Financial Independence

    Looks like you answered all the questions. Sell it and lock your gains.

    The questions is – what are you going to do with the fund available?

  15. Money Infant

    The worst thing you can ever do is to let a winner become a loser so if you are happy with the 12% return for the year then why not sell. Sell and don’t look back, because once you are out it doesn’t matter what the market does, right? I could sleep well at night with a guaranteed 12% year after year.

    1. That is the worst, and I’ve had that happen many times before when I was younger due to a lack of discipline in putting stops. Never again!

      The 12% will grow to +13.5% due to the stable value return fund I’ve put it in with a 2.5% yield.

  16. I’m right there with ya, currently at 12% on the year. I think that you are doing the right thing. You have a goal, the goal was reached and you locked it down. I see nothing wrong with that. I’d rather sell into strength than into weakness. That goes along with part of my trading philosophy, buy the fear and sell the greed. Congrats on meeting your goal.

    1. Nice job being up 12% as well! The thing is, it’s not sell everything and then do nothing. I’m buying a stable value fund option that has a 2.5% yield. 9 months of that = 1.875% return on top of 12%, so that’s almost 14%. I’ll take it.

  17. Economically Humble

    Wo, congratulations on the win.. interesting plan. I suppose cash on hand is better than in the bush.

  18. BusyExecutiveMoneyBlog

    Sam, this is interesting. I think the best thing I like about what you are doing is that you are living by the adage..Bulls makes money, Bears make money but Pigs get slaughtered. I’ve raised cash as well over the last 2 months. Not by selling anything as I utilize a diversified index ETF investment approach. What I do that we’ll see a dip from current levels this year. I’ll be looking to take advantage when that happens.

  19. All of my investments in the stock market are in retirement funds and will stay there. Yet, I think you have a solid point. I have a mild case of timing the market based on when I fund my Roth each year. I wait for a slight dip and jump in for the yearly contribution. It’s not precise, but considering that it will be there for long term, I don’t think it matters. I think your plan seems solid to me.

  20. Darwin's Money

    Sam, I enjoy the blog and last year’s predictions were prescient, but I disagree with selling out of equities based on your prediction. The only reason someone at your age should be shifting equities around (IMO) is to rebalance a portfolio slightly that may have gone out of whack, but not as a market timer. When the market ran up 50% from the pivot bottom in March 2009, that seemed crazy. Time to sell right? But long-term investors, people with time horizons in the decades instead of months/years held tight and realized another 50%+. We’re now up over 100% from the bottom just a few short years ago. Do I feel it’s overdone? sure. Out of whack with the malaise in the general economy and jobs? Sure. But you can’t fight the Fed. There’s nowhere else for cash to go and now that bond yields are rising, it’s a shift not only from cash to equities, but now out of bonds into equities. There’s no reason this rally can’t keep running and your prediction for 2012 could be doubled!

    1. Actually no, time to go long and strong after a huge 2009, which is why I predicted another 13% rise in 2010 (see the linked post), and then another rise in 2011 (see other linked post).

      I’m really glad to hear you turn the corner and become more bullish over the years. It’s when the bears get bullish and say things could be doubled where I am happiest. I hope you are right though!

  21. Made my 10% middle of last month, now I’m just sitting back earning a solid risk free return until the S&P heads back down to around 1,300 or I pull the trigger on buying my first home. Hopefully the latter.

  22. I sold a bunch of my growth stock in the past month. I put most of the money into dividend stocks though. Is that a bad move? You made such accurate prediction in 2011 that I’m beginning to think I should follow your lead. I’m done with acquiring dividend stocks for now and will hold on to the rest of the money for a pull back. I’m also thinking about putting more money into P2P lending.

    1. What about my +13% prediction for 2010? :) I’m not buying anything into this ramp. This is complete herd mentality imo. Where the hell was everybody in December of 2011? What has changed except for the new year and some positive economic info I, and hopefully all of you already knew about?

      I don’t know more than anybody else. I just know that I’m happy with a 12-13.5% return this year.

  23. Romeo @ How We Prevent Wealth

    Haha. Typical, Sam. I don’t think you’re “taking and running” because you have a 12% gain. I think you are doing so because you finally have a chance to run with a gain, PERIOD. A 12 % gain sounds like a lot, but really it’s nothing for a young guy like yourself. What’s the rush to come out of the market? Did you purchase equities with the intent on selling once the “markets” hit 13,000 and 1400?

    Anyway, I’m glad to see that people now have a chance to redeem their “riches,” if they even held on to this point. Get out when you can. You’re not going to be the only one running with the gains. Just wait until institutional investors start shifting from equities to protect their performance numbers.

    You already know how I feel, “We’re suckers to be invested in the Markets” and “We’re all horrible ‘investors’. :-)

  24. I am selling too and I’m up similar levels. If I can double my stocks every 5.5 years with 13% returns, I’m totally in and giving up any upside!

  25. I’m buying index funds regularly (like I always do, up and down) and phasing down individual stocks at for the time being (because those are more risky, right?).

    I recently sold some Apple for a 160% gain and then saw the stock rally another 10% or so from there. I still believe in the stock, but it was time for me to lock in some gains and I’m not looking back.

  26. Whether you were trying to or not, you have timed the market. I heard a quote from Mark Cuban that says if you are ever able to time the market, then sell. It probably won’t happen again :)

    1. I just make reasonable assumptions when my targets are hit, and either stick with them or re-evaluate. It’s easy to tell when people to buy, but it’s harder to let go and sell due to greed. Greed has hurt me many times before when I was younger. Now, I’m just a simple man.

      Here’s hoping I’m wrong and the market goes up another 10%! If so, I fear for the renters and homebuyers in cities such as SF and Manhattan.

  27. Marina K. Villatoro

    I’m just jumping into it now, so I can’t say if it’s a good time or bad. But I’d take the money and run, at least so far, but definitely reinvest. I hate having my money sit around and do nothing!

    that’s why I’m finally jumping in now, since I’ve had my money sit around doing nothign for too long.

  28. I think this is a fine strategy if it works for you. You don’t specify what your goal for this money is. If we are talking about long term retirement money, I prefer a dollar cost averaging strategy. When my horizon of retirement closer, I may very well decide to sleep better at night and get out of stocks after rallies.

    1. My goal for this money is capital appreciation at 2X the rate of inflation and/or the 10-year risk free rate which is currently at 2%. Hence, if I can get a 4% return on my money, I’m happy. If I can get a 13.5% rate of return, I am very happy as it’s like banking an extra 8.5% return for future years, or down years.

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