When faced with an investment that has substantially increased in value one of the hardest decisions investors have to make is whether to sell or hold. A reader of behavioural psychologist Dan Ariely’s blog asked this question about an investment he made in bitcoin that had increased in value by an incredible 4,000%. He wanted to know if he should sell his bitcoins and lock in the gain, or hold onto them in hopes of a further increase.
Dan replied back with a question of his own: Would you buy these bitcoins now, at their current price? He said if the answer is yes, you should hold onto your investment and maybe even buy more. But if the answer is no, it means that you don’t think the expected increase in value is worth the risk, and you should sell.
He said the more general point is that our investment decisions should be about what we think the future will hold, and we need to work hard to overcome the influences of our past actions. No matter what you purchased a given investment for, and regardless of what it is worth now, you should make your decisions only about where you think this investment is headed.
Ariely closed with this bit of wisdom:
“If you do decide to sell your bitcoins, don’t look up their value afterward. Yes, if the value drops, you’d be a bit happier that you sold, but if the value rose, your misery would be much higher—so resist the urge to check.”
This week’s recap:
On Monday I wrote about filing taxes using free software, a costly accountant, or something in between.
On Wednesday Marie explained the pitfalls of buying and managing a rental property.
And on Friday I looked at how the Air Miles expiry policy will affect your reward miles balance by the end of this year.
Weekend Reading:
I don’t normally share financial makeover stories but this one about a 59-year-old BC woman who is set to retire in a few months is worth a read.
Another worthy read looks at how bad life can get when divorcees try to retire. Especially when they’re women.
Wealthsimple took a long look at the TSX and uncovered some interesting data about the companies that make up Canada’s top stock exchange.
A Wealth of Common sense blogger Ben Carlson shares three examples from fellow bloggers who have busted common held beliefs about investing.
TSI Network’s Pat McKeough explains the risks and rewards of an RRSP-meltdown strategy.
Millionaire Teacher Andrew Hallam shows how to beat the S&P 500 index using the Dogs of the Dow approach.
Wealthing Like Rabbits author Robert Brown explains seven differences between TFSAs and RRSPs.
Travelling abroad and need to take out cash? Preet Banerjee has a great explanation of how much it will cost you.
A political blogger says the Canadian Revenue Agency is rotten to the core and it’s time to clean house.
If you hate spending money, you might suffer from Chrometophobia – or a fear of money.
Here’s how five Millennial bloggers think about money.
Career paths are not a straight line and, as experts will remind you, ‘no career decision is fatal’.
My Own Advisor explores some potential portfolio structures and withdrawal strategies in retirement.
Finally, Michael James on Money wonders whether it’s fair that someone who worked and contributed to CPP for 43 years gets the same benefit as someone who takes advantage of CPP’s 7-year drop-out provision.
Have a great weekend, everyone!
