What strategy should I use when I am profiting?

Question

Let's say I buy stocks of a company at $1000, and 6 months later, stock is trading at $1500. What should my strategy be at this point.

Should I hold the stock? or should I sell the stock to book my $500 profit or, should I sell and rebuy at $1500?

Answer 1

Should I hold the stock?

Would you BuY this stock for this price? Yes, this is the same question - you are in a stock because you think AT THIS PRICE it is a good investment. Where it came from is irrelevant. If you would buy it - keep it. If not - get out.

or should I sell the stock to book my $500 profit or, should I sell and rebuy at $1500?

Well, selling at 1600 and rebuying at 1500 is great (with the exception of resetting your timer for long term capital gains). The main question is whether you CAN rebuy for 1500. What if it never comes down?

There is no simple rule - at the end it all runs down to what you expect at a given price.

Answer 2

When deciding what to do with a stock you own, then the price at which you originally bought it is irrelevant. The only thing that matters is how you expect the price to change in the future.

When you expect the price to go down, you sell it. When you expect the price to go up, you hold it or might even consider to buy more of it.

So, looking at the history of a 50% increase in the past 6 month... will the price of this stock go up or down?

The answer is that we don't know. Perhaps it has reached the peak and will now start falling. Or maybe it has just started raising and will go up even more. We don't know what company you invested in. And even if we would know, we can not predict the future.