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Am I Too Greedy In This Stock Market

We’re almost at the half way point of the year, and I have to wonder if I am too greedy in this stock market…

One my goals this year was to increase my income by 50% more than I did last year.  I expected to increase my net worth with income from my online activities, but certain things haven’t panned out so instead I decided to focus my time and money on creating stock market gains.

401k History
401k Performance History

I accomplished my goal, and then some.  In fact, I doubled my income from last year instead of just increasing it 50%.  That said, it would require me to sell all of the stocks in my portfolio to realize that gain.   This creates a few problems for me.

  1. If I sell my stocks, I will encounter a tax hit which I don’t want to pay since my withholdings aren’t enough to cover my gains.  And if you know me, you know that I hate to underpay my taxes.  I hate having to pay the government after a pricey Christmas.  It always puts a crunch on our finances.
  2. The stock market seems to be a “goldilocks market”  meaning that everything is perfect for the market and it could keep going up.  This makes it hard to put money is cash when the market might rise 10 more percent, or even go sideways.
  3. The market is starting to take on the looks of a parabolic curve.  When things go up too quickly, typically there is a correction period to get things back into a mode that’s normalized.
  4. I have this believe that if I watch it closely enough, I think that I could get out before it hit the bottom of a correction.  Of course, this logic is flawed, and yet still I stay invested…

I have to wonder if the prudent person would take 20% this month, 20% next month or 2, then another 20%… until she/he only has 20% invested in the market.  I think the prudent person would never completely exit the market.   Then once the correction, or the parabolic curve is broken by going sideways for months, then and only then jump back in with some strategy.

Decisions, decisions…

Don

6 Responses to Am I Too Greedy In This Stock Market

  1. Although I am not suggesting you sell, it would be capital gains tax. Taxes should not be the determining factor, if the goal is to take some money off the table.

    • Very true. I need to have my witholdings increased at work to counter any tax gains tax.

      Next year, I’ll probably do more trading in my Roth than my regular account.

  2. I recommend you put Trailing Stops on some of your positions. That way, you continue to realize gains if the market goes up and you don’t trigger a taxable event. If the market goes down, your positions will be sold and your profits protected.

    Note: It’s important to use trailing stops instead of a regular stop. I learned the hard way that other traders can see a stop order and punch you out at the worst possible time. A trailing stop doesn’t show up as an order until the threshold has been reached. I usually create a trailing stop of 5% on stocks if I am worried about them dropping.

  3. You can never time the market perfectly. And taxes are inevitable but at a lower rate (cap gains) so it you have reached your goal, the answer may be right in front of you…