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I've been regularly investing in a ETF every month for an year, for the same amount. Now that the fund is at it's peak, I'm not sure what should I do, stay invested for long term or sell it and re-invest with profit in some other fund or should I sell partially?

If I stay invested, I have a feeling that my average price will also keep going up and I won't be left with much profit after few years.

Please advice, I'm new to this. What is a general strategy should I follow on making most of the profits

  • How will your average price keep going up if you stay invested? Only if you keep buying as the fund price goes up will your average price keep going up. If your ETF pays dividends, it might be a good idea to leave it alone. Capital gains plus dividends over a long period of time can build up to a significant amount. Also, how do you know that the ETF has peaked? Nobody can say for sure that the economy has peaked. – user2371765 Jun 24 at 8:41
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If you average purchase price goes up, that means that the price of the fund is going up, which means that the money that you already have invested will grow (and by more than your average price goes up).

For an example, let's say that the fund is at $100 and you have $10,000 invested (100 units) with an average purchase price of 90. Suppose it goes up 5% one month to 105 and you invest another $1,000 (9.5 units).

You now have 109.5 units with an average purchase price of 91.3 ((90*100 + 9.5*105)/109.5) but your overall investment is now worth $11,500.

Now that the fund is at it's peak

You have no way of knowing this. In a bull market, funds are often at the highest point they've ever been. If you think the fund is now overvalued, then it's fine to diversify into something else. But you may miss out on future gains. So it's a risk either way - that's the nature of the financial market. An old adage is "time in the market beats timing the market". If you are investing for the long term (10+ years), then trying to sell before the dips and buy before the gains is futile since you'll be wrong half the time (statistically) and your bad guesses will even out your good guesses (or possibly worse). Learn to endure the dips (even buying more so you can "buy low") and you'll be fine.

Another option would be to start diversifying into different (orthogonal) funds. If you want to reduce risk, invest in a fixed-income fund. Or add an international fund, or a small-cap fund if your fund is a large-cap (e.g. S&P 500).

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What you are doing here, is trying to time the market. You think at the ETF has reached it pick. But how can you be so sure about it? Nobody can tell the future for sure.

It's important, before you invest into a ETF, to have a plan and to know in what you are investing. With this your legs won't shake in bad times.

If you are unsure about your current ETF and you made some profit: Cash out. Replan your investement strategy and invest into a different ETF.

With ETF's you should go for diversification and aim for long term investing. If you invest a in diversified ETF, you won't have to switch it for a very long time. You hold it and profit of the historical average stock market return of round about 10%. One ETF which is really diversified and has a super low fee is Vanguard Total World Stock ETF.

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