Hi all …
I have one question…
Is it a good idea to keep holding stocks for long time or
Is it good to sell them occasionally and book profits and reinvest it?
Recently my friend suggested me that …
after a certain time stock will not give you that much profit (raise slowly)… So if any stock give you profit as you are expecting after that sell stock partially get profit amount and reinvent it in different stocks.
Please suggest… It is a good approach
this is called investing.
this is called positional or swing trading.
dont follow suggestions from random people and blindly agree/follow, because my friend says something else. do your own research before concluding anything.
a good approach, in my opinion, is to learn about the different types of investments available, understand the various asset classes, and then divide your money based on your goals. you can choose to trade or invest accordingly. the authorized pros to help you are sebi-registered investment advisors or RIAs, certified financial planners (CFP), chartered accountants CAs and few others (just google) who are registered and knowledgeable about wealth growth.
This I do quite frequently. I invest, and sell in part so that my average cost comes down to face value of the shares or little above it and leave that stock. However, if there is a dip in this stock, I will re purchase.
My view - Pointless to to have investment doubling on paper, it should be tangible, so booking profit is equally important as buying.
These are my personal views. However on hindsight, if I had not sold the stocks in part over the years, to reduce my cost, I would have been a very, very rich person today. Inspite of this knowledge, I still sell to reduce the cost and keep the cash in FDs.
Even I think about this.
There is nothing wrong with booking profits occasionally, the ultimate goal for anyone in the market is wealth maximization, and each has their own path for getting there.
I believe most investors would actually be utilising the LTCG exemption of ₹1.25L (₹1L earlier) by selling some part of their investment every year.
So, if u can book profits and avoid tax at the same time, why miss it …
Investing for the long term and leaving those investments untouched is done with the hope that, in the long run the compounding effect will provide better returns and maximize wealth. This is especially true when the portfolio size grows bigger.
Staying invested is a great thing, but it requires a lot of conviction and patience to not get swayed by the ups and downs.
By staying invested, you are allowing the existing gains to compound, without losing anything to tax.
But then, there is the reality, the impulse to book profit, especially when you hold a stock which has delivered good returns, but is starting to fall, it is normal to want to sell before it falls further, as sometimes, staying invested with a stock that is falling could potentially nullify the gains made during the year.
Imagine a situation where you Invest in a stock at the beginning of the year, and the stock ends the year at the same price at which the investment was made, this means that the 1 yr return is NIL.
However, during the year the stock might have certainly risen and fallen multiple times. This is where selling occasionally and booking profits makes sense.
Now, If someone stayed invested in this stock, they would have made nothing for the year. On the other hand, if someone was able to sell during the rise, they would have made some return on their investment, and could have reinvested elsewhere.
Obviously all of this looks clear only in hindsight. We can’t always time the market (knowing when to sell or buy).
Also there is no guarantee that the stocks in which we reinvest, will perform well.
What if it starts to fall, this could easily negate the gains made earlier, and it is back to square 1.
I think the key to all this is contentment. If u r okay with the returns already made by the stock and don’t want to get greedy, u can always sell it and reinvest it elsewhere.
It is alright to lose out on an uncertain future gain, rather than losing the gains already made.
Interesting viewpoint… the “Do Nothing” portfolio.
https://www.morningstar.com/stocks/what-beat-sp-500-over-past-three-decades-doing-nothing
And the follow-up article by another analyst.
https://www.morningstar.com/columns/rekenthaler-report/more-lessons-do-nothing-portfolio
"Is it a good idea to keep holding stocks for long time "
It is good to hold but you have to keep up with company news and there are only few companies you can follow and understand.
Is it good to sell them occasionally and book profits and reinvest it?
I sold hudco at 130 , RITES 248, IRFC 71.4 , Bajaj auto 10400 and many missed multibaggers but I do not regret because it made sense to me selling.
Best strategy is something which makes sense to you and gives positive results, doesn’t mean you have to beat some benchmark. Identify a certain return you think is feasible and try to improve from there.
AAA rated bond/FD/NCD can give 8% so try adjusting risk you are taking to returns.
Track your trades it helps enormously on how we behave and what we missed. Try to record why you bought it and sold it.
Equities take time and when things go south your conviction on trades will help you stay the course. Diversify investments it helps.
How do able to adjust the risk?
This is my thesis (here my/me = not a advisor or a financial professional or even a literate)
2 laws/conjecture that you have to remember:
Now lets start with 2nd law, investments in equity tend to give CAGR of 9~12% averaged or any number according to you…
Superimposing the first law on returns and on the second gives you your answer ie: 12% returns today is better than 12% long term…
The catch: To outrun average Joe(long term investor with same parameters)
The real world pragmatism:
So to conclude every other common man is some where in between “Investor” & “Trader” according to his/her environment & parameters.
I manage risk by position sizing in equity, and adding debt funds to my portfolio.
Better you can choose Alpha 50 Fund in Bandhan
its will give super return and its will rebalance on every quarter
or.
Edelweiss Business Cyle Fund - its will rotate according to to Sector Current performer
if you need manually its very difficult
Now a days business climate is changing very fast - Long term is really difficult now a days
Only AMC , Food - Finance stock can look for long term -