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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