When to sell a winning stock: 'If you have an opportunity to change your life, take it'

The concept of HODLing, or holding onto an investment, particularly in cryptocurrency, regardless of short-term price fluctuations, may be unfamiliar to some internet users.

The value of a single bitcoin has increased from $950 in 2013 to over $95,000 today, making the HODL strategy very profitable for those who held on to their bitcoin.

Some investors have experienced impressive returns in various assets, including altcoins, meme stocks, and large-company stocks that have benefited from the AI revolution.

If you're an investor with a significant paper gain, the decision is whether to hold onto it or sell it for a real profit.

Here's how financial experts say to think through the decision.

You fear an investment might go back down: Hold

It's natural to fear that a drop in the value of an investment may occur, causing your gains to disappear. However, it is wise to avoid making decisions solely based on this fear, advises Amos Nadler, the founder of Prof of Wall Street and a Ph.D. in behavioral finance and neuroeconomics.

Nadler was influenced by the cognitive bias of loss aversion when he sold his stake in Nvidia, fearing that the winning position would soon decline. He explained his decision to CNBC Make It, saying, "I was thinking, 'I'm new to this. I just made a substantial profit in a short amount of time.' I wanted to secure it because I was feeling afraid it might drop again."

After selling, the stock skyrocketed. However, it's not always the case, and you may end up making the right decision. It's crucial to set aside your emotions and evaluate an investment objectively, Nadler advises.

"Nadler advises against letting our emotions influence our actions in reality, as it can lead to financial loss."

You're too concentrated: Sell

To minimize risk and maximize returns, it is advised by investing experts to construct a diversified portfolio consisting of various investments that move differently due to different reasons. By doing so, you increase the chances that at least a portion of your portfolio will perform well, and you reduce the likelihood that a decline in any single investment will negatively impact your overall performance.

If your investment has grown significantly and is now your largest holding, you may want to consider reducing your holdings, advises Doug Boneparth, a certified financial planner and president of Bone Fide Wealth.

"He says that setting a line for how much this position will impact the overall performance of your portfolio is crucial, and once you do that, you can approach it systematically."

Boneparth trims his investment position once it accounts for 20% of his investable assets.

It's risky to base your financial future on the success of a single investment.

Your original thesis is intact: Hold

Examine the reason for your investment, advises Sam Stovall, chief investment strategist at CFRA, if you own a winning one.

"What was the reason for purchasing this stock? Was it for the dividend yield, price appreciation potential, or diversification? He recently shared this with CNBC Make It. Then, one must consider whether it has already met their goals or if there is still potential for growth."

If an investment has reached its maximum potential growth, you can safely sell it.

If the company you purchased based on strong fundamentals continues to generate profits and produce solid financial statements, and you still believe in the potential of a cryptocurrency as a store of value, then you can usually feel confident in holding onto your investment.

It will change your life: Sell

If you've made a lot of money on paper, it can be tempting to try to push your investment to the limit. However, if having some extra money could make a big difference for you now, there's no shame in putting some of your profits to work here on Earth.

"Boneparth advised CNBC Make It that if there's an opportunity to transform one's life or achieve a significant long-term financial objective, it's better to seize it rather than waiting for a potential rally or run to continue."

Boneparth advised that one can sell a portion of their investment and retain the remaining portion in the hopes that it will continue to grow.

"If selling half of your investment allows you to continue investing and see the future of the company, you may find a healthy compromise."

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