What to Do When Your Stocks Start Turning a Profit: Smart Investor Moves

SBS Australia suggests that Australians now own $17.3 trillion in assets, which include shares, equities, properties, reserves, and even liabilities. Residential land and dwellings make up the largest portion of the country’s wealth. However, not every investor has struck gold through property investments. Others have diverse portfolios that are starting to see profits. This raises the question of what Aussies should do once they make a profit.

Profits that come from shares can change your life when managed well, but many investors allow emotions to consume them once they hit the positive upturn. Indeed, some rewards are necessary, but it’s worth looking into the financial and lifestyle choices that help you turn those gains into more profit.

What are the Best ASX stocks to invest in right now?

Check our buy/sell tips

Smart Rewards

All work and no play isn’t the way to see positive returns. It’s natural to want to celebrate. Psychology has a role here because even the most modest treats can reinforce positive behaviours around financial management.

Setting aside small reward pots for something enjoyable is a good thing, whether taking the family out for dinner, upgrading your home, or playing online pokies for a quick chance at increasing your gains.

Let’s say you’re going to enjoy some online pokies. It’s important to set a budget, loss limits, and avoid the infamous jackpot chase. It’s also valuable to know how the return-to-player ratio works on each machine, whether enjoying classics, 3D video, or Megaways pokies. You can always read more on CasinoBeats.com to understand the opportunity to reward yourself without overspending your invaluable capital gains.

A measured reward goes a long way, but it’s key to make sure your celebration doesn’t cut into the capital you worked hard to earn.

Reassess Future Investment Goals

Once you enjoyed some rewards after your stocks generated returns, it’s time to reassess the investment goals that got you this far. Are you building a property deposit? Are you investing in retirement? Are you simply growing your wealth? Australian shares have performed well over the last 30 years, averaging a return of 9.8% per year.

However, past performances aren’t always guaranteed to repeat. Setting clear goals matters once you see profits. Some investors prefer locking in a portion of gains and directing it to low-risk assets like government bonds. Others see profit as the chance to increase exposure to upcoming sectors.

Consider Dividends

Profits don’t only come from capital gains. There are various promising dividend stocks for Australian investors waiting to add to the diversity. Dividend stocks from aristocrats like Gorman-Rupp, Coca-Cola, Cincinnati Financial, Northwest Natural Holding, and Lowe’s have allowed investors to see returns steadily for more than 50 years. Meanwhile, this year’s average ASX dividend yield is 3.65%. Those figures are attractive for diversified investors.

Reinvesting dividends accelerates long-term compound yields for investors who saw share prices rise and took action. Dividend reinvestment plans (DRPs) are common among smart investors because they let you build larger stakes in high-end businesses without added transaction costs. Reinvesting in companies with solid balance sheets will keep profits flowing.

Watch for Tax Efficiency

One common oversight when making profits is the tax bill. Capital gains tax (CGT) applies to all Australians who sell shares for a profit. The rate depends on how long you’ve held the shares. For instance, shares held for longer than 12 months become eligible for a 50% discount for the individual’s taxable gains.

Patience and timing when selling shares is everything. Smart investors stagger their shares sales over a few financial years to ease their tax liabilities. Others feed profits into superannuation contributions to unlock the tax benefits while creating a retirement fund.

Focus on Growth Markets

Smart investors won’t hold onto their gains. They redeploy profits into other growth sectors like lithium, artificial intelligence, and green energy, expecting these industries to perform well in the coming years. One example in the energy industry is how the International Energy Agency (IEA) estimates that the demand for critical minerals like lithium will grow 338% by 2030 and 910% by 2040.

Australian producers will step into the spotlight to meet these demands. Meanwhile, investors are starting to show more interest in sectors that rely on lithium, including electric vehicles and grid battery storage. Allocate a portion of profits to these rising industries.

Reinvest in ETFs and Index Funds

Investors seeking more diversity can direct the profits to exchange-traded or index funds for a sensible move. The ASX has shown consistent and rapid growth related to ETF popularity. The Australian ETF market surged to $200 billion in assets under management last year.

These financial vehicles have enabled investors to spread their risks across different industries and worldwide markets while still gaining returns from equity growth. ETFs that track the S&P 500 and ASX 200 could offer steady compounding growth, while thematic ETFs focused on tech or renewable energy increase early exposure to growth markets.

Balance Long-Term Holdings and Profits

Cashing out immediately when you see gains is tempting. However, some of the highest returns in Australia have come from company holdings that lasted decades. For example, CSL shares cost a mere $2.30 in 1999, but the trading price climbed to over $200 in 2025. While the CSL stock price has dropped now, it also shows an opportunity to buy into shares that have already shown good performance over many years, especially if you plan to hold.

Balancing long-term holdings with profits also doesn’t mean you must hold them indefinitely. It simply highlights how keeping some shares in reputable companies could lead to strong returns over the years. Use profits from one stock to fund new ventures in businesses that have shown long-term rewards, even if they have brief declines. High-risk leads to high rewards.

Build Cash Reserves

Setting aside cash reserves for upcoming investments is a smart move. Market corrections are common in investments, creating opportunities for those who have liquidity available. For instance, the COVID-19 crash saw the ASX 200 plunge over 30% before returning to record highs. This would be the ultimate advantage for fast investments at lower prices.

Keep a portion of your profits in short-term deposits or cash to remain flexible. You’ll be in the position to act fast when the next opportunity comes, whether an IPO with promise rises or investing in blue-chip stocks that temporarily trade below their value.