There is always the possibility you will lose more by moving the funds. Like if Facebook had fizzled, that move would have lost you money.
There is always the possibility you will lose more by moving the funds. Like if Facebook had fizzled, that move would have lost you money.
You could have the situation you by 100 of A at $10, for $1,000. Then you sell it when it goes up to $15, and after paying fees/taxes keep $250, then invest the $1,000 in B at $10 each. And B craters and you lose all of the value in B.
In that scenario you lost $750. ($1,000 lost in B, $250 gained in profits from A).
Now its true that A could continue on its path to $20, and had you kept it you would have instead made a profit of say $750 after taxes and still have your $1,000.
What I learned in 1999 was that that is not a good strategy. But it is the first strategy that everyone sticks with it seems (and certainly I was holding on to!), "Hey this has doubled in 5 years, in another five it will double again!".
And part of my thinking was "Gee if I sell it I'll have to pay all these taxes, I'd much rather think of my self as having a net worth of $x rather than $0.66x." Lesson learned.
It's that you do all the stupid stuff when it's only $5k to lose instead of 25 or 50.