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System Thinking — Investment Operational Mechanisms for Success
Profit-taking, Market Timing, Stop Loss, Buyback, Portfolio Management, Risk Control
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Taking Profits
Taking profits is a normal reaction after earning, but the real question is what to do next.
Let’s look at Warren Buffett’s investment decision-making. Buffett once mentioned a scenario where a stock priced at $20 might rise to $40 but could also drop to $10. Most people would hesitate, but he would buy it immediately. One reason is the favorable risk-to-reward ratio, so he acts decisively.
What if the situation were reversed? What if a stock he planned to hold long-term suddenly surged in value? Would Buffett sell immediately?
In 2003, Buffett bought China Petroleum shares at 1.62 HKD and planned to hold them long-term. However, when the Hong Kong stock price jumped to 20 HKD after a domestic listing, he decided to sell all of his shares. A year later, he moved to BYD and held onto those shares for 14 years.
