I am invested in Nifty, Nifty Next 50 and Nifty Midcap 150 indices’ ETFs, they all are in profit now. I am actively trading, and I need capital, so I am thinking of selling the ETFs and using that capital for trading.
Buffett said not to ask the barber if you need a haircut. But I would like to know the views of members as they have more trading experience than me.
Mathematically, what I want to do is correct, I have the chance of getting more with trading than staying in the ETFs, if the time period is 1 year or more. Also, I am not thinking that my trades will surely be profitable, but as I am keeping strict stop losses and I have had good results so far, thanks to the market, I want to take the chance of deploying capital in trading.
The logic behind the thought is that, if the markets go up from here, I will be having more trading opportunities, and I believe I will get better with my strategies, so I will make profit more than what I will get staying invested in the ETFs. If the markets fall, I will not get many trading opportunities, so I will stop taking trades, but the profits in ETFs will also go down.
So what is your outlook about the markets going forward? What do you suggest?
I am not looking at 7+ years time frame. I am looking at much seller time frames, just 1 year or so. So what applies to investing does not apply to trading, as I cannot stay put in my positions, irrespective of the size of the company, if it falls as per stop loss, I have to book the losses, come out, as I need the capital. Investing on the other hand is a different ball game, although played in the same field.
Yes, that is the idea, that if I can beat the index in the time frame that I have selected, why stay invested in the ETFs. This is what made me think about this in the first place.
I always thought investing in Nifty 50 and Nifty Next 50 ETF was for very long term where the compounding effect will kick in. Also this will act as a buffer/diversification when you have invested in individual stock and these individual stocks go down in value. Not sure if it is a great idea to sell these ETF. Maybe you could sell the profit component and use it for trading and leave the rest.
Well ETFs are tradable, so trading, even day trading is permitted I think but will be less rewarding as the spread is high, it become volatile, and buyers ask for less.
While what you say is correct w.r.t to index investing through funds or ETFs supplementing or balancing a stock PF, index investing is also prone to opportunity cost. Purely from mathematical perspective, if I think there is a chance of getting some more returns in investing in something else than what I am already invested in, I want to take that, this applies to a upward trending market. And if I the markets are falling, indices are falling, I will happily invest in the ETFs again.
No I think you got wrongly. The difference is time frame. Mostly weekly time frame comes under investing. I don’t think you can go short in ETF or even In plain stocks for such a long time. I believe you can do this only during intra day though not sure because I have never done short in stocks. And there is no such thing as inverse ETF in NSE or BSE.
I do believe you can go short with futures in weekly timeframe using something as they call as calendar spreads. I have never done that
Someone said investing is long term trading and trading is short term investing. So trading to me is not being investing in longer periods of time, investing to me is having a portfolio of stocks, reading, understanding about the company, quarterly results, annual reports, conference calls etc. I am not doing anything of this here. I am just staying for a few days or weeks here, like in a hotel, this is not home, not even my house.