You Haven’t Made Money Until You Sell

“You haven’t really lost money until you sell.”

That’s the conciliatory refrain we often hear as stocks are falling.

You bought a stock. You’re underwater on the position. And, while your net worth might be a bit lower (temporarily?) you haven’t suffered any permanent damage until you sell.

That sort of thinking tends to make us feel better about poorly timed stock purchases.

Why, though, do we not have a similar refrain when stocks are going in the other direction?

I’ve never heard anybody say, “You haven’t really made money until you sell.” Instead, as stocks move higher most folks are happy to announce, “Look at how much money I made.”

Folks use their increased net worth (temporarily?) to justify increased spending. A night on the town, a luxury vacation, a new car, a new home, etc. These things are possible because our stocks have rallied.

But, we haven’t really made the money until we sell and recognize the gain. And, we could have a real problem on our hands if we’ve used our increased stock values as collateral for loans to fund a better lifestyle – and then the stocks start to fall.

With that in mind, take a look at this chart of Duolingo (DUOL), a former Wall Street darling…

From mid-2024 to mid-2025, DUOL was one of the best-performing stocks in the market. The stock rallied from $180 per share to over $530 per share – a gain of nearly 200% – in less than a year.

It didn’t matter that at $530 per share this mobile learning platform operator traded at 200 times earnings, 24 times sales, and 21 times book value. The company was changing the way we learn. DUOL was dominating the foreign language learning market. It was teaching people how to play chess. The potential of its platform was limitless.

So, valuations didn’t matter… until, one day, they did.

DUOL peaked in May. It has suffered a steady decline since then.

The stock traded near $190 per share yesterday – completing a “round-trip” and essentially erasing all of the spectacular gains from earlier this year.

Folks who cheered, “Look at how much money I made,” back in May can’t say that anymore – unless they actually took some profits off the table.

Here’s my point to all of this…

There are quite a few stock charts right now that look similar to how DUOL looked back in May. Many of the stocks are trading at astronomical valuations – because the companies are changing the way we do things. And, for the moment, valuations don’t matter.

There will come a time, though – probably sooner rather than later – when valuations do matter again.

Before that happens, folks will do well to recognize, “You haven’t really made any money until you sell.”

Best regards and good trading,

Jeff Clark

Source: Jeff Clark Trader