When you buy a Colgate, Gillette, PnG, Nestle, etc. and hold over an extended period of time – say like 30 years, you ANYWAY get a good CAGR. This is largely because of the rising dividends, splits, bonus, etc.

One very risky, but very important way of increasing yields is of course to do a positional trade in the same set of shares. I have said this time and again – and here are some recent examples. My portfolio has Cholamandalam Investment, EiD Parry, Ingersoll Rand, Basf, – and I am giving these examples because of some recent transactions that I did.

I bought EiD at a price of Rs. 119 – and recently sold at Rs. 204. Clearly this is with a view to buy back at say 186. Now this transaction may or may not happen, but if you have sold 5% of the holding, it does not matter, right?

In shares like say Colgate or ITC you might be able to do things a little differently. Colgate for example gives you a very poor chance to make money by selling – and hoping to buy back. So in shares like Colgate you stay on as a pure investor. However in 2014 many MNCs gave me a chance to sell and cover up – BASF, for example hit a high of 869 and then came down to 700 – giving a fantastic money making opportunity. A share like Cholamandalam – gave a chance to exit at say 365 (it went to a high of 377) and you could have bought it back at 355. And it did on good volumes.

However in shares like Wendt it is very dangerous to sell ASSUMING that the prices are high. Suddenly the volumes dry up and you cannot complete the second leg of the transaction.

So you need to be careful in playing this trading game. You should not have any regret for shares lost to vagaries of the market / your own reading of the market. I recently sold all my trading positions in Reliance – the best price that I got was lower than the current price. This means I cannot play the ‘trading game’ in Reliance till I get the heart to buy some more trading position in Reliance…..:-)

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  1. This is only for experts. For basic investors, it is always good to just hold and do not do any positional trading (unless you have a lot of money in the stock and just trade 5% of holding as Mr.Subra is doing)

    btw, I am a big fan of Subra’s blog.

  2. Hi Subra,

    Can you explain this a bit more – for example, how did you figure out that you should exit BASF, and that it may significantly drop ? Did you use technical analysis ?

  3. absolutely Karthik. Once you have 10k shares of a company it is easy to deal in multiples of 500 each, like I do. I have the patience to sit tight. For e.g. I sold Reliance at 900, 920, 975….but still am holding the INVESTMENT portfolio. If (when) the market comes down will buy back. If it does not come back, will buy something else….

  4. Ayush

    very difficult to explain each move. For example I sold BASF because the speed of it going up was just too much – AND I COULD NOT FIND the reason. In case of EiD parry I bought at 119 and within 3-4 months saw it at 205, so sold at 205 and bought back at 188. Sold again at 205 today – and happy to keep selling into the rally with EVERY 10% JUMP in price. Will also keep window open to buy on a 10% dip. So if the price goes to 225 I will sell more, but will be a willing buyer at say 210. However rarely do I do more than 3 buys or 3 sells without covering….unless of course I wish to go to a zero trading position quickly.

  5. Ayush

    I do go wrong too – I have about x nos. of Cholamandalam. I thought it was fully priced at 290, so I sold 500 shares, then I sold at 377 (bought it back at 360), then sold at 330, and again at 355 (today). Now I have hit my ‘trading quota in one direction’ of 1500 shares. Now even if it goes to 400, I will not have enough in my trading portfolio, so will not sell. It is tempting to keep selling on the way up – but then suddenly the portfolio will vanish if I do not keep some such discipline….

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