I receive so much of advice these days on my inbox, that I would die if I read them all. So sorry I stick to a few people whom I can talk with, and reports I ignore. I do read reports of 2-3 brokerage houses – only if it is not STOCK SPECIFIC.

One topic which comes up quite often is ‘should I book profits in equities’ and ‘should I book profits in my mutual fund portfolio’.

Frankly these are 2 completely different topics and need to be handled that way.

The portfolios that I manage consists of a lot of commodity stocks (EID Parry, Hindalco, Tata Steel,…), Industrials (Cummins, Carborundum Universal, Wendt, Esab), Power (Tata, Ntpc,), Banking (Hdfc, Hdfc bank, other banks I do not wish to go public because they are in my trading portfolio, NEVER in my investing portfolio – even though I may take a 1 year view).

Now fairly obviously I cannot take a view on EID Parry based on the Sensex, right? It has to be based on the price of sugar and the political stupidity in TN and Andhra. Similarly in case of Coromandel Fertiliser – it has to be based on the fertilizer policy (I have always held if fertilizers are not subsidized, the food subsidy will go up!!). Similarly today the decision to hold on to Tata Motors has to be on the basis of JLR sales in China…

HOW THE …..do i give one answer ‘should I book profits in equity?’ as if it is some one animal? This is like our great media saying ‘FIIs are selling’. L O L. I know FIIs who are doing attractive private deals even as I write it – and it is on the buying side. So ask ‘Is it time for me to book profits in Bharti Airtel’ – NOT ‘Is it time for me to book profits in equities’.

I have not ‘booked’ profits in many shares (e.g. Proctor and Gamble, Colgate, Gillette, – or if I have, I have even bought it back in case of Gillette and Esab),…have held Hero Honda, Tata Motors, Tata Steel, Tata Power etc. over 30+ years (traded in a small portion of it, yes, but that is perhaps marginal), booked a lot of profits (inspite of some buy back in L&T)…and am happy with the performance.

Now take the case of Mutual funds. I have invested (frankly do not remember too much of redemptions except at rationalisations once in a while) into Hdfc Top 200, Hdfc Equity, Prudence, Franklin India Bluechip, Prima, I Pru Discovery, Prima Plus…..again upwards of 12-13 years plus…NEVER BOOKED PROFITS.

Now of course there can be a lot of people who can say ..’If you had sold in 2007 and bought in 2009…blah blah..’. Luckily I did sell in the end of 2007 – that was because some specific shares which I held were terribly expensive (and I did not believe they deserved that price)…but that was about 10-15% of my portfolio…and I seriously think I GOT LUCKY, not smart. If I were really smart, I would have known the following things:

when to sell

how much to sell

how long to keep money in a liquid fund

when to shift from equity to debt and

when to shift from debt to equity.

I am not that smart. However I am smart enough to know that searching for such a person is too time consuming.

 

Related Articles:

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

  1. I guess in some of these stocks your current yearly dividend income would be greater than the purchase price !!

    I wish i could say this 30 years from now, that I still hold some of the MF’s and stocks which i bought in 2011.

    Great!

  2. Unfortunately, no one tells us what you mentioned above:

    1. when to sell
    2. how much to sell
    3. how long to keep money in a liquid fund
    4. when to shift from equity to debt and
    5. when to shift from debt to equity

    Even financial planners and stock analyst won’t tell you. Does anyone ever ask question WHY???

    Most average people feel, stock market is a gamble/being lucky/fluke/etc. They will watch financial news channels/try and get advice from stock guru/etc.

    “Everyone says we cannot time the market” but who really wants to time the market, all we want is to align ourselves with market. What does this mean!!!

    When market goes up, we enter stock funds and when market goes down we enter debt funds…. REALLY!!!

    On what basis we arrive to this conclusion!!! Well the reality is there are tools available to understand markets and YOU DO NOT NEED TO BE A GURU for that.

    Take a look at this link:
    http:/Direction-Investment-Strategy/208890270

    It won’t take more than 1 hour but once you understand you are set for life, besides you can do all analysis using FREE public data.

    The BIG QUESTION is ARE YOU WILLING TO TAKE EFFORTS? OR simply looking for quick ways to get rich cause there aren’t any…

  3. Subra Sir,

    What you have written is the universal truth that you cannot time your buys and sells in equities(stocks/MF’s). Unfortunately any new investor into equities takes time to understand this. Even I took time to understand this. Even though expert analysts were shouting that we cannot time markets, but it took me some time to believe this.Also when you buy or sell equity it should be stock specific fundamental story or value change which should warrant buy or sell. Booking profits from MF can be for a variety of reasons like money needed, wrong fund selection, or reducing number of MF etc. But these thing an individual can learn only through experience not just by watching TV or reading a book. Experience teaches as it has taught you and me. Enlightening Post Subra!

Leave a Reply