Plan Your Work, and Work Your Plan

I literally just wrote an email to my wife five minutes ago outlining the need for us to sit down and map out how we need to plan out our “sell” points for our alternative investments, (like Bitcoin) and I thought this might make an interesting reminder for this weekend after we’ve seen such bubble-like behavior over the past couple of months/weeks. 
 
You see, human beings are really terrible at predicting the future, and by proxy, managing long-term investments. I don’t care who you are, we all fall victim to euphoria/complacency at the top, and “fear of loss” at the bottom. I’ve been at this for over twenty years and only now do I feel as if I’ve attained a mediocre proficiency at it. 
 
If I could boil down my current stance on managing long-term investments, it’s this: 
 

• Determine your exits ahead of time
• Scale out of the position into strength, not weakness. 
• Sell too early vs. selling too late. 
• Understand that you will never be able to spot the very top

 
Spotting the “top” of any market trend has been one of the most impossible tasks that I have tried, and failed continuously at. What makes the beginning of the “end” any different from a normal pullback in a trend? Answer: no difference. You’ll only know it later on when a “lower high” is formed. (Conversely, spotting a market “bottom” is far easier)
 
And for those of you that want to hedge at the “top,” I wish you luck as well. You will tire of spending the money to keep buying long puts and flushing your money away on a regular basis, most likely ceasing this hedge right before the “real” move lower…and then spending far too much on a wasted hedge when the price unfurls rapidly. 
 
This scenario gets a little trickier if you are trading assets in a cash account and a sale becomes a taxable event. If you wish to avoid paying taxes on your core investments, then you can replace the “exits” in the above plan with “hedges.” You must learn to hedge, or play “defense” during times of peace, and not “war” when the price is rapidly being dismembered. Your goal then is to understand when to take profits on the hedge trade. 
 
But don’t get wrapped around your axle on a complicated scheme, especially if the assets in question are ones where you don’t intend to pass down to others. Just come up with a simple plan on how to take profits, and then program yourself with these actions. Don’t think about it, just DO when the time comes. 
 
You will be far better off than those that say “I’ll figure it out when the selling starts.” 

In your corner...Doc Severson