I had ITC at an average of Rs 175 before this rally. Once the stock broke out, I started a weekly SIP and kept buying ITC. Now my average price is Rs 292. If I continue to average, my price is going to become closer to spot soon.
When do I stop averaging up?
I want to hold ITC for longterm and I’m looking at the best way to accumulate the scrip.
If you want to hold for long term, then you should understand the business, understand its valuation by itself, and how the market is valuing it, learn some technical analysis, and be on your toes to take if any action is needed. Because if there is a rally, a froth, without any reason from the business, the price sooner or later will come down. Also, even if there are reasons for such an price increase, it can go into consolidation and may not move for a few quarters.
It all depends on if it is a pure long term holding, or a long term holding with entries or exits, or a trading bet.
Not an expert but this is my point of view.
You say, you want to accumulate the scrip. Your average cost was 175 which due to purchases has gone upto 292. This means your quantity of shares has increased as well due to purchases.
At what price point due you think, ITC might not fall, in case of a crash, in your own assumption, let us say 300, then you can buy until your average reach 300 and stop.
At the same time, what price point will you start selling a stock. Do remember, all the profits are notional until you realise it, booking profit is as important as buying stocks. This will ensure that your average cost will come down too. To do this, you should have quantity.
Disclaimer: I am invested in ITC - I remember, at one point of time, the stock price rallied in 2017 - 18 from 180 to 342, I did nothing because I was in love with this stock. Then the decline came, I did nothing, it started falling in 2019 to 234 and then the crash of 2020 which brought down the shares to 142. I could do nothing just watch in awe the fall from 342 to 142. It was then I realised how foolish I was that I did not take any action when the price was falling. I started buying at these levels as there was no other option (as the company was fundamentally strong and a cash generator), and put a target as to when I will start to sell in small quantity, then for few years, the price remained at 200 (ITC became a joke though they used to generate tons of cash), waiting paid off, the price did touch my target level and I started selling in very small quantity as and when the price moved up until I reduced my average cost of investment to a level I know the stock price will not fall. To me I have a good quantity of stock at an average cost which according to me is at a very good level. Now I will leave it untouched. Will start rebuying if the price falls below 300. If GodsLuck is with ITC and if it increases to 450 plus, I will then buy in small quantity based on my average cost and upto what level I am willing to go up.
The point I am trying to make is not to be too connected with a specific stock.
Thanks for sharing your rollercoaster story. I feel that I am also heading in this direction as I’m unsure what is the value of ITC and I dont have any targets / SLs for the stock. I’m happy with the dividend and its pledged for collateral. But I’m seeing my gains slowly becoming less. ITC was my first scrip to give me 50% gains. Now the gains is down to 15%. I’m trying to mentally prepare to hold for the long term.
with this also prepare mentally to add more if it falls very much without a lot of change fundamentally.