I just got off the phone with an agent at my tradfi institution and when i told them i was planning on taking profit on some stocks following the “moonbag” crytpo strategy (remove your principal + a little extra to pay yourself, then leave the rest of the appreciated money as risk free to grow or do what you will with) he sort of rebuffed that idea in the sense that the taxes/fees paid on trades/sales didnt make sound financial sense… but didnt offer a real rebuttal.

Having said that, someone please correct me if im wrong here, those taxes/fees are unavoidable regardless of whether you sell once, twice, ten times (obviously there are diminishing returns/motivations to this strategy if you do this multiple times so as to be cost prohibitive); or are in a short term or long term capital gains (for stateside trades)

i know this doesnt translate directly to crypto but i havent really found a more “sound” profit taking strategy that i feel “works” so im open to suggestions, is this a benchmark profit taking strategy or should i be researching other strategies? (advice on strategies not required but very welcome)

  • Obvious comment: if the fees are a fixed percentage of the amount, you should be fine. If the fees are a fixed amount plus a percentage, frequent trading would cost more Aug 3 at 16:31
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    "i know this doesnt translate directly to crypto " - you know that you have to pay taxes on your crypto gains, right? Aug 3 at 17:15
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  • I've linked to a very related discussion of how and why you might want to 'rebalance' your portfolio. The context of how you've posted the question is directed entirely at how to rebalance your investment in something that has gone up many x in value, which is probably why your 'tradfi' resource was confused, because that is quite rare unless you are speculating heavily. Aug 3 at 17:28

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I think the point the person was making is that you cannot really take out "the principal". See my answer here for a detailed example. So in your situation you need to withdraw enough to both return the amount that you originally invested, and the amount needed to cover the taxes for the prorated gains you're withdrawing.

There was a point made in the comments about the fees - if the fee is fixed per transaction then obviously this strategy will result in more fees. But this would probably not be a significant amount.

Other than that the strategy is really up to you. The trader obviously wants you to not withdraw your investment since they benefit from you holding the money with them, so wouldn't rely on that as a qualified financial advice.

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