WHY to exit a position vs. WHEN to exit a position

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by daftstar

The question isn’t *when* you should get out, its why you should get out.

Remember, the goal isn’t 1 10x gain (though that’s pretty amazing, right?!). The number of companies that see a 10x gain are < 1%. However, if you get out at say a 80% gain, you’re looking at a significantly larger chance of that happening. If you’re looking at a 20% gain then, many companies can give you that return.

Understand what your end goal is and break it down on how you can get there. Run toward that dream instead of running away from whatever it is that you think money will help you escape from.

So what’s all this mean? Figure out where you’re trying to get to. Want to turn 10,000 into 1,000,000?

You could hope for 1 stock that you’re fully invested in generating a 100x (1000% return). Chances of that happening… minimal. Chances of that 10,000 turning into 15,000 (50%) return much better. Look, making 1,000,000 out of 10,000 is NOT easy. It’s luck, timing, and to an extent skill and discipline.

If you want to make a million bucks out of a single win on a 10,000 investment, you need to find something that’s going to generate a 10,000% return. Good freaking luck. But… do you think you could find opportunities that can generate a 20% return? Probably so. Yes, you’ll need to do this 500 times, but if you don’t think you have the time and discipline to to find 500 opportunities in 700 days (2 trading years)… I mean… take a step back and breathe… Of course 10,000% is possible – you’ll see that in WSB all the time. But what you won’t see are the other two types of people:

  1. People who made that 10,000% return over several years. Guarantee you this group is larger than that # of people who generated a single 10,000% return on 1 investment.
  2. People who lost it all chasing that 10,000% return who have no interest in sharing their pain for BS karma points. Guarantee you that this group is significantly larger than group 1.

To put this all in perspective: Do you think you’d have an easier time of generating:

– 1 10,000% return or

– 500 20% returns.

Put another way, do you think you could generate 1 20% return each day for the next couple years? It’s not easy at all. But then again, if that’s not very easy, then exactly how easy is generating 1, 10,000% return. And what happens if you lose your 10,000 on 1 investment that went south (cough…SPX weekly puts / calls)

BEGINNING INVESTMENT: $10,000

EXPECTED OUTCOME: $1,000,000

# of positive investment outcomes % return required Chances of this happening
1 10,000% Really freaking low
10 1,000% Really, really low
20 500% still really low
50 200% you’ve had a few of these I bet
100 100% MSFT hands these out in the long run
200 50% doable
500 20% Really, really doable

Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.

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