What is the right price to book profit on my shares?

19 February 2015

What is the right price to book profit on my shares?

Greetings from Hitesh! Hope you are enjoying the fantastic February. Smart ones are minting tons of money in the market while normal guys are still waiting for the right time!! One of my readers has asked me above question. He is in profit. He is puzzled whether to book profit now or wait for some more time as market is going up. His concern is shared by many, so let me deal with the same.

Let us look at long Human History:-

Look back 1000s of years of human evolution. We have been used to stay in discomfort / frugality and all sorts of hardships. It is only in recent 50 years we have got the best of the comforts of life and technology is still working hard to make our life more and more comfortable.

For all of us to pass through pains / discomforts, live in frugality is normal. But to live lavishly, with all luxury is a recent phenomenon. We do not know how to handle the life when everything goes as per our wish!!

How does this apply to Investments?

Your old habits are stored in DNA and it is affecting your investment behaviour today also. Normal investor is comfortable holding shares with 80% loss but he will become insecure when the price goes up by say 10% to 20%!! He starts behaving abnormal. He asks what to do now? Should I sell?

According to us this behaviour is nothing but our old habits of getting discomfortable when going gets good.

What is the solution?

You are used to DUKH or discomfort but you start getting panicked in your good times. All kinds of insecurities encompass you once you have your good times. The challenge is to remain normal during your good times. If you can manage the same – you will reach to the top.

Normal investor V/s. Seasoned investor

Say normal investor buys 1000 shares of ABC Ltd at Rs.10 each. If the price goes up to Rs.20, he will sell 500 shares and hold the rest. His calculation is simple – he has taken out the capital and now he can hold these 100% profit shares. But, he will sell these shares also sooner than later.

Seasoned investors do the 100% reverse. They buy at Rs.10 / Rs.20 / Rs.30 / Rs.40 and this way he keeps on doing pyramiding. Rakesh Jhunjhunwala was buying Titan from Rs.40 to Rs.900 per shares. How many of you can do this? You need power of character and clarity of purpose to do this.

What is our answer?

While booking profit we use the thumb rule – we look at the potential of the particular company and not the market movements. If your logic and research says that best time of company is yet to come, we will go on adding the shares and not selling shares.

What next?

Market is giving you ample opportunities to make tons of money. Do not sit on fence. Just come to the market and bless us for life.

Have a Thoughtful Thursday.

Follow me on Twitter @hiteshmparikh Or on Whatsapp - +91-9869425399.

Live With Passion…Invest With Passion.

Hitesh Parikh.