When it comes to investing, two very important factors will improve your level of profit taking.
The first factor is a margin of safety.
That means that you want to buy a company with close to zero chance of experiencing life-threatening financial distress. You also want to get more than you pay for, as that makes it easier to tolerate the often ridiculous short-term behavior of the markets.
The next factor, a very close second, is the idea of skin in the game.
Skin in the game is the ultimate measure of accountability for a company.
It means that when you buy a company, you want the people running it to have a large stake in it – at least a stake large enough to matter when things go well and large enough to hurt if they screw up.
It they don’t have a large stake, it’s as if they have a multimillion-dollar golden parachute. And if business heads south, you’re the one who is going to pay – not them.