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 International – 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.

Now consider what people like Buffett say “the holding period of a share is forever”. I have held Supreme Industries since 1988. It was in 1988 that somebody asked me to do a research on SI because he was holding a big chunk of Supreme. When I asked him for fees, he said “the fees is – buy and hold SI..why should I pay you fees”. For the record, he did pay the fees, but yes my benefit of holding SI since 1988 till today is far greater. Have I booked profits? NO. I have not.

 

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  1. Blunt truth is hard.

    Everyone is aware that Sensex and Nifty levels reached abnormal disconnected with the growth of economy and index companies. The current PE levels are not backed up with the results.

    FII flows and FEMO (Fear of Missing Out) are pushing markets higher which they do not deserve.

    Book profits in penny/small/mid caps and sit on cash. Sell large caps if markets further rise 5-10%.

    Happy to come out of equity in full.

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