Harvesting Equity

by Dr David Phelps

by Dr David Phelps


’m amazed many times when people have big equity plays –

 i.e. when their investment or business equity increases because of their work, or market conditions –

and they’re often still in the business or investment, but there’s a potential profit to be had if they harvest some of that equity.

What am I talking about here?

The example everyone’s heard about is Bitcoin. I’m not a big fan of investing in cryptocurrency, but here’s the point: People who invested in Bitcoin in the last few years are seeing huge gains, and now they’re wondering if they should sell or stay in.

A lot of people would say to stay in, because “it’s only going to go higher.” This isn’t just cryptocurrency though. The hype in the entire marketplace is huge right now; there’s a lot of money seeking yield, and interest rates are low and money is cheap. 

If you’ve got assets and equity, it might be time to take some chips off the table and harvest some of that equity. I know it feels good to stay in and let that equity continue to compound, because you think it’s going to keep doing what it’s been doing.

But rarely does that happen. 

I think we’re on the verge of a big market reset – maybe this year, certainly by the following year. If you’re getting great returns, it’s hard to want to take your money out and move it. But the worst thing you can do is leave everything in one game, without considering safer ground you can diversify to or move your equity to.

When the market resets…don’t be one of the ones who stayed in too long. 

It may be time to take some (not all) chips off the table, put them aside, go back and understand the business cycle, then buy back in when the cycle’s gone back down – and run it back up on the other side.

Remember - pigs get fat, hogs get slaughtered.
To your freedom!

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