I Had to Learn to Take Profits
In Bitcoin and Time
When I say “Take Profits”, I’m not just referring to a trading strategy. I’ve come to learn that taking profits is an important concept that translates well into other parts of life. I’m going to cover this topic from two angles, the first is of course, profit taking as it pertains to finance. The second is profit taking in the abstract sense. I’ve thought quite a lot about this, and so I believe I have something valuable to share with you.
The Basics of Taking Profits
When you’re learning to become a trader, virtually every guide or article will tell you that you need to write down your trades, and your rules. For example,
“I am going to buy Bitcoin at $50,000, and sell half when it reaches $100,000.”
This is otherwise known as “taking out your principle". It’s the idea that you should take out what you put in, and leave the rest to grow (or shrink). The point is, it doesn’t matter what your investment does after you’ve taken out the principle, because you got back 100% of what you started with.
There are no rules to profit taking necessarily. You can set your targets rather arbitrarily.
Take out 10% after a 50% rise
Take out 100% after a 25% rise
Take out 10% after EVERY 10% rise
The important thing is that you stick to your rules and targets.
How Do I Take Profits?
One of the important things to determine up front, is what asset you would like to have be the one that represents your profits. In other words, what asset do you take your profits in? Most people will take profits in their FIAT currency, because this is the currency you think in. It’s also most likely the asset you started with, when making investments, and so it is easiest to think of your profits in terms of your initial investment.
Taking Profits in Bitcoin
I have opted to think in Bitcoin, as most of my money is Bitcoin. I am on an ultimate quest to get away from thinking in fiat, and instead, think in Bitcoin terms. I’ve spent about 20 years thinking in fiat, and the entire world around me measures value in fiat, so I think I’ve still got a ways to go before I am thinking in Bitcoin terms on a daily basis.
Regardless, I take my profits in Bitcoin. I do this because Bitcoin is the thing I want to end up with at the end of the day. My goal when I wake up in the morning is to go to sleep with more Bitcoin than what I started with. Bitcoin is my savings, but it is also a part of my working capital strategy. That is, the capital that I can use to take out a loan.
Taking Profits in Fiat
The main difference between taking profits in fiat, and taking profits in Bitcoin, is that you’re most likely going to turn around, and spend that fiat on something. Either on another investment, or a product. You might tuck a little bit of that cash away for a rainy day, but chances are, you’re putting it to work somewhere else.
When I take profits in Bitcoin, I am ultimately just increasing how much Bitcoin I hold. I don’t intend on parting with any of the Bitcoin, on account of my strategy of never selling Bitcoin. If I have more Bitcoin than what I started with at the beginning of the day, and I am never going to sell my Bitcoin, then my take profit strategy irreversibly increases my net worth.
Why Take Profits? Why Not Let it Ride?
In general, I think it’s a good strategy to stick with your investments for a long period of time. That is, several months to years or decades at a time. But I am also for the strategy of taking profits along the way. Taking profits with a plan is a good idea. Taking profits without a plan is a bad idea. Then you just have extra cash sitting around, and doing nothing. It is best if that cash is being put to work somewhere, or appreciating in value somehow.
Most investment or financial advisors will tell you to keep adding to your investment portfolio, and not subtract from it, except for a couple of reasons. The first might be a downpayment for a house. The second might be for some sort of emergency. I would go so far as to consider buying a house, doing a renovation, or taking a vacation as take profits strategies.
Taking Profits is Rewarding
You should reward yourself. Treat yourself. Buy yourself something nice. You earned it. Get yourself something nice. Spend some quality time with yourself. Go do something you enjoy. Take some time to Relax.
All of these phrases are encouraging you to take profits. I began to see taking profits very broadly when I started to expand my conception of what is money. You’ll notice that the last few phrases had more to do with time than they did money. As of late, I have come to take the phrase time is money extremely literally. If time is money, that means I can take profits in the form of time. Profits can be taken in whatever form of value you like. However you decide to conceive of value, take profits in it. Ask yourself, what is the most valuable thing in the world to me? Money or things is the answer for many of us. Time (eg. time with family, alone time, creative time) is the answer for the rest of us.
I don’t think either one is right or wrong. In most cases, both are needed.
I regularly take profits in time. I have far more time on my hands than I ever have. This is because I’ve placed a high value on my time, and have optimized my life around it. I continually have more and more time to spend on myself and those around me. Another way to think about that, is that I have more time to invest in the abstract endeavours that I care about. May that be my familial relationships, my piano playing, the doing of jigsaw puzzles, or reading a book. All of these things don’t necessarily bring me more monetary wealth, but they’re all time well spent.
Time is Money
You may not have stopped to realize this, but time being money is in the language we use everyday.
Spending Time
Time Well Spent
Banked Time
Save Time
Daylight Savings
Investing Time
Spend the Day at the Beach
This was, and continues to be a massive revelation for me. I have had to continually update my worldview in light of this metaphor. Mrugakshee and I are constantly looking for new ways to save more time. For example, we just started receiving curated meals from a company in an effort to spend less time on thinking about, preparing, assembling, and cooking supper. We can spend money, on a company that does this for us, and in return, we have more time (and a delicious meal).
With more time on our hands, we have the ability to invest more of it in ourselves, and the progression of our lives. Whatever personal development means to you, in my opinion, is one of the highest goals you can pursue. One thing about me is that most of the work I do, takes place in my head. I am constantly thinking about the next move, and so more time to focus on these decisions, and less time cooking, is taking profits (time) from one place, and reinvesting it in another.
Taking the notion that time is money seriously, and as a result, taking more profits in time, has forever changed the way that I perceive value.