It is smart to take profits if you are using money to diversify your investments start business or improve your home as these actions build long term wealth. However you wisely caution against spending profits on unnecessary luxuries or converting them into cash that loses value or jumping into risky altcoins just because of hype which is mostly gamble and not real diversification. And I also think that if anyone has already invested in Bitcoin so he/s is at right place. He/s just need to hold it for long time. But he/s must have stable income to stick to his/her plan. So due to this diversification is compulsory.