When to sell your shares
People say one can never time the market. However, that should never be used as an excuse to adopt an indolent attitude towards your investments. Just like there is a time to buy, there is also a time to sell. Let us show you how:
(1) Trend of the stock market:
This is difficult to gauge but if you keep your eyes and ears open, the signs will become visible. In fact, the best time to start getting out is when the downward trend is still not visible but there is exuberance all around. Too much of unbridled optimism is usually the best sign that the trend will reverse sooner than later. It is then time to slowly but steadily start lightening the holdings. Anecdotally, the period of 2007 to beginning 2008 represented this state of affairs. The sensex touched an all-time high of 21,000 and all analysts were breezily predicting that the sensex would soon touch 25,000, thereafter 40,000 and that mount 50,000 would be reached in a couple of years. That should have set off warning bells that things were too good to be true. Always err on the side of caution and get out when the going’s good!
(2) Change in fundamentals underlying the scrip:
There are several examples one can think of. A blue chip steel maker who ventures into a multi-billion dollar buy out of an overseas steel company – is hailed by all as the new-age industrialist – soon finds out that things are not as hunky-dory as the power-point presentation had pictured it. Gets saddled with huge debt, huge inventories, recalcitrant staff, declinig market share and declining fortunes. Some other contemporary evidence: An engineering giant who buys shares of an ill-fated software major – makes a huge loss when the share price tanks – and buys more and more shares in a desperate bid to ‘average’ its cost. The engineering giant could well go the way of the ill-fated software major. Always err on the side of caution and get out when the going’s good!
(3) Too much concentration:
There are tangible benefits of portfolio concentration, but there can also be too much of a good thing. Take a good hard look at your portfolio. Do you have too much of a particular sector? Too much of Oil & Gas; infotech; real estate? Too much of a particular share? Let Reliance not overwhelm your portfolio. We all know the fact of the investor who put all his money in Satyam. Always err on the side of caution and get out when the going’s good!
portfolio, shares
Last updated 491 days ago by Mukesh
