Realizing Gains

Paper wealth is worth what?

Investing

Don’t invest more than you can afford to lose

Pretty common advice when entering investment markets. Stocks, bonds, commodities, crypto. They all carry the above warning. I could expand on it but I think others have covered this topic extensively enough.

I’m going to move right past that common advice into the next steps.

Trading

So you’ve invested what you can ‘afford’. Great! Now you’re trading too, right?

Awesomesauce!

You’re making money too, yes?

Realized Gains

Now what? You’ve built paper wealth. You have ‘money’ but it’s wrapped up in your preferred market(s).

What then?

How do you actually realize your gains before the market takes them from you?

What’s the Policy?

Everyone loves to thump upon the drum that is

Don’t invest more than you can afford to lose

YAY!

Helpful, no doubt. But what about

What happens to paper wealth?

How do I realize my gains?

When do I exit the market?

How do I protect my gains?

Good Question…

Yeah, I’ve been there and thinking about this for awhile. I’ve got my own opinions about the current state of the markets (crypto, stock, etc) and they don’t look all that rosey for the near/mid term to me. I’m expecting corrections and I’d like to put some of these gains to work before they vanish.

Bubbles pop fast. I’d like to get something for my efforts. Perferably at or above the rate I get at $dayJob for my time.

What do I do and what’s a sane strategy?

This has been eating the back of my mind alive for a long time now.

Today I figured out a rough rule of thumb and acted according to my risk preferences.

Action Plan

The plan I came up with for realizing my holdings:

  1. Took stock of all my HODL and exchange accounts
  2. Took stock of any holdings I expect to survive a bubble bursting
  3. Double checked what I’ve put in (aka: what I decided I could lose)
  4. Figured out my current value across everything
  5. Migrated 75% of all my holdings to my off ramps (where I convert holdings -> fiat)
  6. Shuffled my remaining 25% holdings into what I feel are ‘safe’ assets that will survive a crash
  7. Off ramped (converted to fiat) 50% of my total holdings
  8. Left 25% of my total holdings on the off ramp
  9. Started watching the market much more closely to ensure I don’t miss the need to off-ramp the remaing staged assets (what I have left on my off ramps) ahead of a crash

Execution

I executed the above plan today. I moved a ton of money around (by my standards at least). I had 4x what I put in today. I managed to 4x in 4 months.

QUADROUPLE

That’s a healthy return (minus the various fees) and I felt I was in a position to cash out and put those gains to work. I converted 50% of my paper wealth to fiat and am putting that to positive use in real life.

Results

At this point I’ve gotten my initial investment back and an amount equal to that intial investment.

I’ve got another round waiting on the off ramp just in case the market moves in a very dangerous direction on me.

I’ll have 2x what I started with even if the market crashes. That’s a great return. 3x if I get my assets off the ramp prior to a complete market collapse. Even better!

No FOMO for me. I didn’t hit 10x like some do on crypto but I’m a bear and risk adverse with financial ‘stuff’. I’d rather slow grow and hit a 4x than gamble for 10x. That’s who I am and it guides my strategy.

My Recommendation

My recommendation is to do something similar to the above. Everyone can build paper wealth over time. That’s fine and dandy but until that paper wealth lets you buy hemorrhoid cream, it’s useless.

Convert your paper wealth to current ‘real’ wealth along the way and realize those gains. Put those gains to use to enrich your life and/or take care of other financial burdens that you could alieviate.

I did that today and I hope you do the same.

I’m proposing the following advice for those wondering how to realize gains

Realize 25-50% of your gains when you 2-5x your initial investment. Pick the range of values based on your personal risk profile.

Hugs and Love

💓 Here’s hoping you get to realize your gains as well. 💓