Episode summary
Is It Time to Take Some Profits?
Ask The Compound
· · Hosts: Ben Carlson, Duncan Hill · Guests: Josh Brown
Summary
Josh Brown argues that big gains in stocks should not automatically trigger profit-taking unless the investor knows what the position is for. For long-term investments, he says a sharp rally can simply confirm the original thesis; for trades, the right response is to define a stop and treat the position differently from a core holding. He is skeptical of selling just because a stock or index is up a lot, and he says the key question is whether the position was ever truly an investment or merely a short-term trade.
On portfolio concentration, he pushes back on a rigid 5% cap for individual stocks, saying that kind of rule makes more sense for asset allocation than for stock picking. He prefers letting winners run and using stop-losses or wider bands if risk control is needed. He also says middle-aged investors with strong income and a long runway should not over-fear downturns; they still have decades for compounding.
On inheritance, the host and Brown say the money should be planned deliberately, with 529 contributions and some spending on family experiences both on the table. For the young adviser worried about succession, Brown’s advice is blunt: don’t build your career around a firm that says the business will go to someone else’s children; move on and find a place where ownership is actually possible.
Key takeaways
- Josh Brown says investors should distinguish between a true long-term investment and a trade before deciding whether to take profits.
- Brown argues that an arbitrary 5% cap on individual stocks is more useful for asset allocation than for concentrated stock picking.
- Brown says middle-aged investors still have decades of compounding ahead, so they should not overreact to the possibility of a market pullback.
- Brown and the host suggest inherited money can be split between family goals like 529 plans and spending on experiences rather than left idle.
- Brown advises the 25-year-old adviser to leave a firm that plans to pass ownership to the founder’s sons rather than to employees.
Notable quotes
“if you own shares in a company and you have high conviction that the company is going to be a big success and the stock price is going to reward you, then who cares”
“if you're changing it from an investment to a trade that quickly, it was never an investment to begin with”
“why proactively sell something that's in the Charlie Munger said never interrupt the act uh never interrupt something while it's compounding”
“I won't make an investment if I don't think it it could at least 2x. I have no interest”
“Do not do not spend your I I get it. It's stable income. You can find that elsewhere”
How the episode opens
This is Ask the Compound, the show where you ask and we answer. I'm Ben Carlson. The S&P 500 is up 35% or so from Liberation Day lows in early April.
A lot of stocks are up way more than that. Is it time to lock in some profits and wait for a pullback to reinvest? We answer this question and more straight from our viewers.
Stick around, please. As always, we're here to answer your questions directly from our Compound viewers and listeners. Ask the Compound Show@gmail.com is our email.
If you're in the live chat, fire away, please. We'll answer your questions directly on the spot. The chat's already blown up today.
All right. Yeah. Brilliant people.
All right. On today's show, we discuss questions about when to take profits after a big rise in stocks, how to size your positions, when to let winners run, and when to trim them. Um what to do with an inheritance.
That's going to be a question a lot of people are asking in the years ahead. How to invest in middle age, that's me, and how to think about succession planning as a young financial adviser. Today's show is sponsored by Public.
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From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- taking profits
- rebalancing fomo
- inheritance planning
- asset allocation
- advisor career advice
Companies and tickers mentioned
- Public
Watch the episode
Watch “Is It Time to Take Some Profits?” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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