Why Long-Term Capital Is in No Hurry to "Take Profits"
English translation of the Chinese original (AI-assisted). Read the original in Chinese.
In trading and investment education, "taking profits" is almost treated as a virtue.
It stands for restraint, discipline, and risk control.
But when we shift our perspective from individual investors to long-term capital—large financial institutions, sovereign funds, and allocators who invest across cycles—we discover a counterintuitive phenomenon:
Truly long-term capital is often in no hurry to take profits.
This is not because it does not understand risk, but because the way it makes money no longer depends on the act of "selling."
I. Taking Profits Assumes You "Make Money from Price"
Taking profits only makes sense under one condition: your main source of profit is the price difference after an asset rises.
For individual investors, this is reasonable. You buy because you intend to sell at a higher price and turn paper gains into cash.
But the world of long-term capital is not that simple.
When positions are enormous and horizons are extremely long, "selling" can instead become a costly action:
- It can move market prices
- It can expose the true intention
- It can disrupt long-term structural positioning
So at this level, price is merely the result, not the objective.
II. Long-Term Capital Has Long Made Money in Several Layers
Long-term capital does not rely on a single "buy low, sell high." It cares more about whether an asset can be financialized again and again, rather than cashed in only once.
Take large physical assets as an example. Physical ownership itself can generate several sources of return:
- Arbitrage between futures and the physical market
- Leasing and financing income
- Advantages in delivery and liquidity
- Combined operations with derivatives, ETFs, and trusts
Under this structure, the asset itself is more like an "underlying system," while price movements are merely a by-product of the system running.
Selling the underlying asset can instead weaken its ability to keep generating returns.
III. Taking Profits Means Leaving a Structure, Not Just Realizing a Gain
For long-term capital, "taking profits" does not simply mean money has been made. It means exiting a position.
And once many key positions are exited, it can be hard to get back in at the same cost—especially when:
- Market capacity is limited
- Physical resources cannot be quickly replicated
- Getting in requires long-term infrastructure
In these situations, long-term capital tends to:
- Adjust the pace rather than liquidate
- Hedge risk rather than sell
- Control volatility rather than abandon the position
It manages structural risk, not just the risk of a single price.
IV. Time Is Long-Term Capital's Cheapest Cost
For individuals, time is an opportunity cost. For long-term capital, time is an advantage.
As long as an asset has three characteristics:
- It does not naturally disappear over time
- It can keep generating structural value
- It is positively correlated with long-term macro variables
then "continuing to hold" is itself a low-cost strategy.
Compared with frequent trading, time can do many things:
- Wait for inflation to lift nominal prices
- Wait for changes in the structure of demand
- Wait for institutional or financial-structure adjustments
From this angle, rushing to take profits is actually a waste of time.
V. The Real Endpoint Is Often Not Selling
For long-term capital, the endpoint is rarely "selling at the highest price." More common outcomes are:
- The asset is absorbed into a higher-level financial structure
- The asset becomes part of settlement, collateral, or pricing
- The asset is turned into long-term influence or institutional leverage
In these cases, "selling" is not victory. Entering the system is what completes the process.
Conclusion
Taking profits is a virtue in a short-cycle world. Over long cycles, it is often not the core action.
When an asset is still providing structural value, the most rational question for long-term capital is not "Should I sell?" but "Am I still standing in the right position?"
If the answer is yes, then a rising price is merely part of the process, not the endpoint.
Images in the original are not included in the web version.