1) Taxes. When you sell you will owe taxes (considering you’re selling at a profit). At best you’re probably looking at ~23% + whatever state taxes you’re in. So, you may need to sell right before the asset drops a considerable amount. Hard to time.
2) You can’t predict. It’s easy to look back. But you don’t know at the time. Saying that, there’s pretty well defined practices on selling a bit and holding a bit.
Taxes are on gains, but they are far from irrelevant when comparing buy-and-hold strategies with those involving many transactions. An x% tax effectively reduces net profits by x% every time you sell, meaning that it eats into the compounding rate (at the buy-sell interval), which is fundamentally different from eating into your "simple" profit as it effectively would for buy-and-hold.
To give some concrete numbers, imagine you want to invest $1000 for 10 years with 10% APY with gains taxed at 20%. Buy-and-hold nets you $1000 * 1.1^10 = $2594 pre-tax, and $2594 - (2594-1000)*.2 = $2275 post-tax. Cashing out and immediately buying back in every year nets you the smaller $1000 * 1.08^10 = $2159 post-tax.
What you’re saying isn’t relevant because the HODL philosophy is that you believe bitcoin will moon, therefore you can buy all dips and cash out inevitably when it moons.
No. It means don’t sell in a bear market [1]. From the originator, GameKyuubi:
> You only sell in a bear market if you are a good day trader or an illusioned noob. The people inbetween hold. In a zero-sum game such as this, traders can only take your money if you sell.
It’s not irrelevant at all. You use your capitalization for margin loans and credit. Naturally you’re hedging so it’s not super important but I wouldn’t call it irrelevant in many cases.
And gains are great! But tax consequences should be considered if you plan on reentering the position with the same capital.
1) Taxes. When you sell you will owe taxes (considering you’re selling at a profit). At best you’re probably looking at ~23% + whatever state taxes you’re in. So, you may need to sell right before the asset drops a considerable amount. Hard to time.
2) You can’t predict. It’s easy to look back. But you don’t know at the time. Saying that, there’s pretty well defined practices on selling a bit and holding a bit.