How long should I hold on to a share?

You should be buying shares only if you have the capability to hold it on for a few years. You should not be forced to sell a share in desperation just because you need money. Investing, so is a long run game..and you should be ready to be invested for a long term goal like buying a house after 10 years or retirement after 20 years. Even then, the selling has to be from a position of strength – you should sell when the markets are up, or when you decide that the share is not worth holding. It should not be from a “I need money urgently” kind of a decision.

Follow up question Subra..”I bought Idbi bank in the late 1990s..or maybe in 2001..and the price is exactly where I bought, and I have not made any money over the past 20 odd years. How do you reconcile this with what you said earlier”

Answer: Blindly holding on to a piece of shit for 20 years will not make it a great share. A good share rewards you in the long run, but a bad decision like yours hurts very badly. You had 1000 shares bought at Rs. 19..and then you watched the share price go up to Rs. 165 if not more. What made you keep holding to the whole quantity? why did you not sell say 100 shares – you would have recovered a big part of your cost. You could have sold and bought back. You could have sold at 90..if not at 165. Clearly your portfolio suffers from lack of strategy. You have picked up a few shares in random – you bought Idbi bank shares because you thought Hdfc bank was expensive. Of course Hdfc bank was expensive – and then it got even more expensive!! So if you cannot create a portfolio (sizing, and composition both are critical), do portfolio reviews, not know whom to ask whether the fall is temporary or permanent…you should stick to mutual funds. However if you are willing to learn a lot of wealth can be created by investing in direct equities. Forget what happened to your shares in IDBI bank, remember that the Sensex was 2000 when you bought this piece of shit. Today the index is 39000. Which meanst your Rs. 19000 would have become 370,000 Rs. if you had just invested in the sensex. So for most doctors who do not wish to devote time to learning investments…it is much better to look for a good IFA who will invest your money and make sure that you perform at least as well as the index – and far more importantly help you meet your goals.

Subra how am I supposed to know what is a normal fall and what is an abnormal fall?

Well, it is surely difficult for many market veterans too to know why the market behaves in a certain way and why a particular share behaves in a certain way. Lets take your shitty example of Idbi bank…when it went up you could have sold. If a share price goes up far more than the market, it means that there is a lot of buying. Obviously the reverse is also true – there are more sellers than buyers, prices drop. So when you buy a share for Rs. 18 and you watch it go up, you could sell some at say 40, 90, 140…or tell yourself I will have a rising stop loss. When the price is going up I will hold but keep a stop loss that will FORCE me to sell when the price falls. So if you had a 20% stop loss, you would have watched the share go to Rs. 180, but at 150 (on the way down) you would have sold off all the shares.

The other way to look at it is to say if the market falls 10% and my share falls 20% – I will start looking at the share again. This too would have triggered your sale at some stage.

Sadly there are no fixed rules about how to initiate a sale. It is your alertness, and having an ear to the ground, etc..which will all help..

 

 

 

 

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  1. Hi Subra sir, Yes idbi was a bad pick. But, about sensex – only Reliance, ITC and HDFC twins weight-wise constitute 40% of sensex. But recently even the good stocks in broader markets have fallen 20-30% from peaks of 2018 January (including cholamandalam). I wonder if some fund manager/ individual was able to beat the sensex or bank FD returns – during this 2 year time frame. Most diversified mutual funds YTD returns are -6%. It is also evident that corporate earnings have reduced and so has the gdp. Today’s scenario these 4 stocks are doing well and sensex is afloat just because of popularity. Hope the earnings catch up. or there may be some churning or rebalancing needed. thoughts..?

  2. Just a thought crossing my mind…..not sure the reason for focus on Doctors….in a few earlier posts too….just a thought (..hmmm but I am not a Doctor 🙂 ).

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