How To Handle A 262% Profit

What would you do if you purchased shares in a stock and made a profit of 262% two years after you purchased it?

Would you sell it?

Would you hold it?

Would you buy even more?

Most investors would likely sell it, to make sure they locked in such a big profit. To quote the great Bernard Baruch: “no one ever went broke taking a profit”.

I’m not entirely sure I agree with that. I believe that money left on the table is opportunity cost and should be considered a loss nonetheless.

If you purchased Netflix when it was at $23 a share, and sold it at $100, you made a profit of 300%. Now, on the surface that is a tremendous return – and one you shouldn’t scoff at.

Unfortunately, though, the stock would ultimately go to $800 a share over the next ten years, before splitting 7 for 1, before going  back to $400 a share. All told, you would have left 11,873% on the table.

That, my friend, would make any investor want to cry.

Two years ago, I purchased 262 shares of Invitae (NYSE: NVTA) at an average price of $7.40 a share.

The first two years of owning the stock was very painful. During that time, the price dropped to under $5 a share. It seemed stuck between $6 and $9 a share.

Then in December of 2018, sentiment toward Invitae changed after the company reported earnings. The stock exploded, going from $9 to $14 in almost a straight line.

After a mini pause, the stock would continue its move higher, and advance to $22 a share.

Three weeks ago Invitae issued a secondary in order to raise money. A secondary is when a company sells stock to institutional investors after it has gone public in order to raise money. The secondary was priced at $19 a share.

The stock did not skip a beat. It was lower the day after the announcement was made, but continued to rise the following day.

Today Invitae sits at $26 per share. My current profit is 262 percent.

I have absolutely nooooooo desire to sell one share of stock.

History shows that the real money in the stock market is made holding over decades. The best performing stocks in history all required a holding period of much, much longer than two years!

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click the image of the book at left to be taken to its Amazon page.  (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)

 

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