This is the ninth and final post  in my investment basics series.  The intent of this series was to layout a framework that can apply to all types of investing.

Whether  you seek to minimize your risk or have a high risk tolerance,  I am assuming you seek the highest possible, return either income or capital gain.

Step 3 Realize the Gain

If your focus is on income you are realizing your gain (profit)ongoing.  If during the monitor and manage phase there are no indications you should leave the investment, (i.e., the income stream is constant or increasing with no signs of change) then sit back and enjoy.

If you are focusing on capital gain or a combination of capital and income gain this is the step when you sell and take your profit.

During the monitor and manage phase you might have chosen to sell for little gain or even a loss.  That would be a risk mitigation or stop loss strategy.  This final step in the cycle is about selling to take profit.

Timing of the Asset Disposal

A very common question is “When is the best time to sell” .  It’s human nature to want to time the profit taking with the peak value of the investment.

That way there is no recrimination that you sold too soon (left profit on the table) or sold too late and did not make as much as you could have .

In the real world, selling at peak value is typically just luck.  A more constructive approach is time the sale with your investment goal.  For example if an annual return goal was 12%, when you hit it, sell.

Sell regardless of what the stock does next, ignore that and celebrate sucessful achievement of the objective.

This method relies on you knowing what your exact investment objective is; that is a clearly measurable goal.