YOU CAN'T SPEND KUDOS

or deposit a victory lap into your IRA. So forget status, reputation and bragging rights. The only reason to invest in anything is to

. Bows are for little people with big egos. Profits are the only acknowledgement I need.

And although I've bought my share of sour stocks, once in a while I'm fortunate enough to come up with a few winners as well. While I'd love every investment to show a profit, you only need a handful of smart ideas each year to put together a respectable return.

So far this year, one of my best-performing trades has been in utilities, a sector that's shown exceptional strength since I started pounding the table last fall. As regular readers, along with those who watch me on Fox News Channel's "Cashin' In", can attest, this has long been a favored sector, one in which I've been able to experience the best kind of success that which you can spend.

And while finding winners is difficult enough, managing them is oftentimes even more challenging. Once you're fortunate to have one, you're immediately faced with the conundrum of just what to do with it. In my case, I'm confronted with the winner's curse: Should I pull the plug on my beloved utilities, or take a risk by holding on to them with the hope of even more electrifying returns?

Probably the hardest element of managing a winning trade is simply having the gumption to stay in it. Grabbing a profit, especially a generous one, achieved over a relatively brief period of time is extremely tempting. But as I've often pointed out, it's the losers, not the winners, that should be routinely cut from a portfolio. It takes time, effort and money to establish a winning position. Once you've got one, don't be foolish enough to quickly trade it away.

To that end, I believe the worst strategy in dealing with winning trades is to sell them too soon. Yet I often hear from investors who make it a point to dump investments simply because they've hit targets 30% above the purchase price. To me, that's downright asinine. Just think of all the traders who sold Microsoft or Sun Microsystems in 1996 for no other reason than because they'd booked a good profit. How many thousands of basis points were left on the table just because investors were overanxious to hear the cash register ring?

Even more common is the downright bizarre practice of "portfolio rebalancing," in which losing allocations are methodically bought and winning trades are sold. This approach, popular with many financial planners, is a recipe for underperformance because it systematically replaces strong allocations with weak ones all in the name of diversification. Considering the market doesn't "know" where you got in, why trade away big positions in stocks that have the wind at their backs? That's precisely where the gravy is made.

So the most notable way to deal with a winning trade is to do your darndest to stay with it, riding the gains for as much of the move as possible. And when a big bet does pan out, you'll find that small trades grow to become a dominating influence on your overall portfolio. For me, that's occurred in big-cap utilities like Duke Energy, Allegheny Energy, Exelon, Southern and California Water Services Group. Trades that started as 2% to 3% of my fund have appreciated, in some cases, to encompass 6% or more. It's a problem most of us would be happy to have.

Instead of dumping winning trades just because they've grown, I'll instead start to diversify the portfolio's risk by deliberately fishing in other pastures besides utilities. Existing trades aren't abandoned, but assigned specific stop-loss levels. New money can be directed toward different types of investments.

For example, with all the bad news surrounding hedge funds that trade convertible bonds, I've begun looking for value in this volatile and relatively underowned asset class. For individual investors, I believe funds remain the best way to achieve exposure. Closed-end choices such as TCW Convertible Securities fund, Advent Claymore Convertible Securities & Income fund, Nuveen Preferred and Convertible Income and Ellsworth Convertible Growth and Income fund all boast attractive dividend yields and trade at a discount to their underlying net asset values. This is an appealing new area for me in which I'm just beginning to put money to work.

Also, amid all of the anxiety last week surrounding terrorist bombings in London and damage from Hurricane Dennis, it's worth noting that smaller-capitalization stocks continued their outperformance, with the Russell 2000 index notching a new all-time high. So if you were heavy into large-cap utilities, diverting new money toward smaller-cap names in other sectors would keep your skin in the game while spreading the risk.

As I've written before, it makes sense not only to follow the market but also the slow-moving herd, whose arrival almost always heralds a trade's imminent unraveling. If you're making money, then it's never too long before the crowd shows up wanting to hop on for the ride. Once that process has begun, it's usually an ideal time to begin to move on from the trade.

While we can graph price action and economic fundamentals down to the decimal point, evaluating public perception (a.k.a., the herd) is a much more difficult and subtle process. Amid the strong performance for utilities, I wait each week for the Barron's cover story or the BusinessWeek feature article touting the red-hot gains. When that finally happens, it will likely serve as an excellent point to begin paring back positions. Case in point was a recent Newsweek cover story on the falling dollar, which ironically turned out to be a great moment to go long the greenback.

At the moment, however, it appears the public is still more indifferent than indulgent when it comes to investing in most utilities. Right now, the group appears to inhabit an investment no-man's land: too expensive for the value investors, yet not flashy enough for growth players. I don't see the trend in utilities reversing just yet, and with winning positions already established, I'm content to hold on for the ride.

In the market, when you're on a roll you sure as heck better sop up the gains while you can, because the good times never last. Unless you learn to exploit winners fully, there's really no sense in unearthing them in the first place.

Jonathan Hoenig is managing member at Capitalistpig Hedge Fund LLC. At the time of writing, Hoenig's fund held positions in many of the securities mentioned.