A short tutorial (YouTube video by Alberto Costa) explaining three long-term profit-taking strategies: (1) sell near long-term resistance (example: a Singapore REIT trade using breakout confirmation and proximity to 50/200 moving averages), (2) sell to rotate into a clearly better investment (don’t be emotionally attached), and (3) portfolio rebalancing (periodic check—example every six months—to restore target allocations). The video includes a numeric rebalancing example starting from a 10,000 initial portfolio split 25% across four assets and shows how to rebalance after gains and when adding new contributions.
Questions this video answers
(1) Sell near resistance, (2) Sell to buy a better investment, (3) Portfolio rebalancing.
Initial portfolio = 10,000 split equally across four assets (25% each = 2,500 each).
US stocks = 4,500; Bonds = 3,500; Emerging markets ≈ 2,500; Gold = 1,500; Total = 12,000.
3,000 per asset.
50-period and 200-period moving averages (entry confirmed by breakout closing above resistance and above the 200 MA; exit considered when price is far from the 50 MA).
Chapters
Hi and welcome to this video on how to take profit for long term investing. The previous video I touched a similar topic that was how to take profit with trading. And today I want to show you three ways to take profit for long term investing that are quite different. So let's start with the first one that is related to the chart you see here. Usually when you do long term investing, the idea is to accumulate shares of good companies when the price is low and you believe that in the long term the company price will increase. Now what you can do is for example, when you see that the price is going up too much, you can sell to take profit and then you can buy the shares later when the price will go down. Because the price cannot just go up, at some point it will retrace back. And this is especially useful when you are trading dividend companies, companies that pay you dividends. So together with the capital gain you also get your dividend payout. And one of these examples is REITs Real Estate Investment trust. And this actually what you see on the chart is a real estate investment trust in Singapore. So let me show you the idea here. What what I did is it was a real trade. I took, I enter at this level around 265 around here. You see there was this kind of resistance here, okay? And actually this zone, remember our resistance is a zone. And remember that when we see a price hitting a resistance for at least three times, we want to wait to see a breakout before going long. And that's where the breakout happens at this level. Maybe I will show you around here what happens. Breakout candle closing above the resistance and at the same time above the 200 moving average. So I enter here and in the meantime I collected dividends. Now what is the problem? The problem is this. I saw the price going up. That is good for capital gain. And, and at some point around here it was hitting this level around 285, 286. So why this level was important? Well, to show you this I have to change here. Let's reset again to 10 years. Maybe here you can see. So this is the 10 years chart. And you see here that this level was a long term resistance. It was it once, twice and then here it was approaching again this level. And you can see probably that around here the price started to. To hit this level. So what did I say here? I say, okay, I put sell limit order around here so in case the price is hitting this level again, I will sell. And that's what happened. Now the price went even Above, I don't know if the price will keep going up. Of course nobody knows. But since that was a resistance, I decided to take profit here. And the other reason is notice that the price starts to be quite far from the 50 moving average. You see, the distance is far and usually when this happens then the price will snap back to 50 moving average. So that was the reason why I decided to take profit on this reit. That is still a very good investment. And my idea is that at some point when the price will go back, I will accumulate again. And just to show you the difference between this kind of uptrend and what happened here, you see here that the price is close to the moving average. You see, it's quite close. But here you see that the gap is much larger. That's why I decided that okay, here can be a good take profit opportunity. So let's write this down so we will remember when to sell. So take profit for long term investing. Now, long term investing I don't consider short selling because you should not do short selling in the long term. Number one, as I said, is near resistance with the idea that if the company is good, you can buy back later. Now what is number two? Number two is another thing you can do that sometimes you are investing in a company and then you see that there is a company that is much more interesting. For example, if you are investing in real estate investment trust, you may have a company that is paying more dividends or a company that is at a lower price, meaning in terms of value is much more attractive. So what you can do in that case, if you are making some profit, you can decide to sell and then use the cash to buy this new stock. So the other one that I write here is there is a better. Investment. And this is important because you, you should remember that just because you are investing in a company, you don't have to fall in love with the company. You can always sell. And then if the price is later in the future again at a very nice value, then you can buy again. What is number three? Number three is something else you can do when you have a long term portfolio is called portfolio rebalancing. What does it mean? Suppose you, you start with let's say 10k. Okay. And then you want to create a portfolio with four assets. So you may have US stocks and then you want, I don't know, bonds. Then another one could be, I don't know, what can we use here? So we, okay, emerging market. And let's say gold. And you decide to put 25% each. So it means that you have 2.5k here, 2,5k here, and then again here, and then here. Now let's say that in this kind of investment you want to add every six months, for example, additional money. Or maybe every six months you want to check the performance of the portfolio. Let's just consider the second case easier. Every six months you want to check what's going on. So for example, six months later, then you find out that your US stocks are worth. 4.5k. Okay, maybe your bonds are 3.5k. Maybe emerging market is still the same. And let's say gold is at 1.5 K. Now, the portfolio here was 10K. Remember the value of the portfolio here is what, 12K? So you made a 20%. Okay? Now the idea is that you want to keep the same proportions that you had here. That in this case was an allocation, an equal allocation. Why that? Because you want to sell what was outperforming and you want to buy what was underperforming. So in terms of long term investing, you are buying cheap and you are selling the winning stocks. So you hope that in the future the gold will be the one going up and it's maybe more likely that US stocks, for example, will go down because they are, they made already some profit. So what do you have to do? Well, you have to convert this portfolio that you have now in another portfolio where you have again an equal allocation. So 25% of 12K is 3K. So you need to have 3K. 3K, 3K and 3K. Right. You want to have the same proportion here. Now what does it mean? It means that you have to sell 1.5k of US stock because you have 4.5. Then you have to sell. 0.5k of bonds. This one is 2.5. So you have to buy 0.5k of emerging markets and you have to buy 1.5k of gold. So you see what you are doing? You are selling something to buy something else. You are selling these 0.5k of bonds to buy 0.5k of emerging markets. And at the same time you are selling 1.5k of stocks to buy 1.5k of gold. So when you do this operation that is called rebalancing, then you get a portfolio. Of course, now the total value is 12k instead of 10k, but the proportion is the same as before. So that's the idea of portfolio rebalancing. So let's just recap these three techniques. Number one, we can sell near the resistance. And I show you with the example of the chart before what it means? It means you buy at a good price, the price is increasing, you are happy and then you reach a level where is more likely to see a reversal, to see the price going down. So what do you do? You can sell your shares and then you can buy back later when they are again at a good value. The number two is you can sell everything if there is a better investment. And the number three, as I say, is the portfolio rebalancing that I just explained here, where the technique is having at the beginning some kind of allocation of your portfolio. And then after a regular period of time, you will check what is the value of the components of your portfolio and then you will sell or buy in order to get the same proportion. I mentioned before that you may even add money here. So what does it mean? Let's say that on top of that you also add 3K. Or just to make things easier, let's say 4K. Let's say that you also add 4k after 6 months. So it means that the value of your portfolio is now 12k plus 4k 16k. Now what do you have to do? Well, every position will be now 4K, right? Because we have a 25% of 16K. So in this case, if. If you have to reach 4k, what do we have to do? Well, you. You will sell 0.5 of US stock. Here you will. Actually it's better if we write it. Here you will sell 0.5 of US stock, right? Because you have 4.5. You want to reach 4. Here you have 3.5. So you have to buy 0.5k of bonds. Here you have 2.5. So what do you do? Well, you have to buy 1.5k of emerging markets. And here you have 1.5. So to reach 4 you have to buy 2.5. Buy 2.5k of emerging market. So as you can see, we have to buy 2.5 plus 1.5, that is 4.4.5 and we sell 0.5. So in total we are buying 4.4k more. That is exactly what we put in. Okay, with this I would like to conclude the video. Thank you for watching. If you have any question about these or about the portfolio rebalancing computation, please write a comment and I will answer to your questions. If you like the video, you can put a like and subscribe to the channel. So you will get a notification when I will upload new videos. And with that I would like again to thank you and see you next time.
