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Great news!  The market has run up – and so is your account.  But a gain is not a gain until it’s in cash – in your account.   Selling a position that is up is the only way to capture that gain.  And capturing gains presents several challenges:

  1. Timing:  When do you know a position has peaked?  Sell too early – and you leave money on the table.  Wait too long, and some (perhaps all) of the gain can slip away.
  2. There’s a cost/commission to sell
  3. Once you sell – cash in on the sideline – not invested/not earning
  4. There’s a cost/commission to re-enter
  5. There’s a similar timing issue for re-entry.  Do you wait for a dip to re-enter?  Will you have the guts to shove your chips back in when the market is at low ebb?
  6. If you’re in a taxable account – capturing gains will trigger income, and/or capital gain taxes.
  7. If the security pays a dividend – you may want to accelerate or delay your decision to capture that dividend.

Not only is that exhausting – each of those decision points will have an impact on the net amount of gain you ultimately capture.

Consider a Money Contract instead.  They perform with the market, and on the anniversary of the contract, gains are locked in and credited to your account – no fees – no decision points – no timing.  What’s more, money contracts lock out losses – so you can never lose a captured gain.