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Warren Wednesday 5/3

In the 1985 Berkshire Hathaway shareholder letter, Warren Buffett wrote:

“Should you find yourself in a chronically-leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.”

Have you ever been a part of a project in the Web3 space that looks like this?…

Successful Investors Know When To Sell

If so, you’re not alone. Buffet would suffer a similar fate decades after his initial acquisition of the textile business — Berkshire Hathaway in 1965.

Buffett saw tremendous opportunity in the textile industry but, over time, the commoditization of the sector led to declining earnings. Rather than go down with a sinking ship, Buffett shuttered the original Berkshire Hathaway textile business in favor of growing its financial services and insurance businesses.

Successful Investors Know When To Sell. buffett sold berkshire when he realized it was a dwindling business
Original Berkshire Fine Spinning Associates Building

While a HODL mentality might work for a few strong projects, many that endured precipitous devaluation amidst volatility have never and will never regain their position. In these cases, “time” is not your friend, and investors must make a concerted effort to determine whether to change vessels rather than continuing to hope for leaks to get patched.

So how does an investor know when to jump ship? While circumstances to sell an investment are different and personal, there are a few guidelines that can help you evaluate if it’s time to sail in other waters.

1. You’ve Identified a Better Opportunity

We’re playing this game to earn the highest return. If you find more attractive investments while your choices currently languish, it could make sense to sell what you own in favor of the better opportunity.

it's ok to sell a position for a more lucrative opportunity.

2. You made a mistake

Mistakes happen. I make them. Warren Buffett makes them. Lord Elon makes them.

Sometimes an investment in a project isn’t what we thought it was. Admitting mistakes can be hard. You’ll be better off as an investor realizing them quickly and getting out of your position.

acknowledge mistakes and learn when to sell

3. The Project or Token’s Outlook Has Changed

Things move at lightning speed in the web3 space. A project that offered unique and innovative business models during the bullish 2017 ICO boom might be trending down because of competition, regulatory uncertainty or total disruption. All good things must come to an end…just ask Barnes & Noble, Sam Goody — and even — your town’s local mall.

investors sell when they see dwindling business models

4. Irrational Exuberance

Fairly often, crypto markets get overly optimistic about the future prospects for a project or token, bidding its price to unsustainable levels. This is particularly prevalent in the tech sector — investors should be mindful that no tree grows forever. When you see fervent activity in your portfolio, it might be time to take some money off the table for future prospects.

trees don't grow forever. sometimes you gotta sell

If you found this post interesting give us a follow and stay tuned for more Warren Wednesdays featuring excerpts from our book, Warren Buffett in a Web3 World.

We took over 1,000 pages of wisdom from the Oracle of Omaha and condensed it into a snackable, easy-to-read investment guide to help you on your journey to grow wealth in the web3 space!