Hold or book profit?

     “I have been investing in share market for the last 3 years.  The investment is after spending long time for studying the company potentials and giving preference to the diversification in the selection of stocks.  But all shares didn't give the expected return.  Some shares have given 100% profit while some others are still continuing below the purchase price.  In this context I decided to book profit in the most performing shares and to hold the least performing ones.“

     This is the most common complaint of ordinary investors. 

They purchase shares as per the hints of any analysts or in accordance with their own research.  But even though the time passed long, the share price remains unmoved where it bought or it goes down below the purchase price.  Over all performance of the market may be upside though, the share price of this particular stock stays where it bought. This is much interesting!

     But the share holders hesitate to sell the shares in loss.  It might lead to breaking their concept that  'whatever they touch would transform to gold'.  Though the Sensex is shining and the other shares are giving 100% profit, the particular shares they bought are only declining. They will start persuading themselves to book profit on the performing shares and to hold the least performing ones. After doing so they would start waiting for the  the least performing shares expecting it would go up soon. 

     A portfolio with diversified stocks may be compared with a beautiful garden.  A gardener knows that how difficult is to maintain a garden. Hard routines like watering daily, spraying manures, removing weeds are necessary for maintaining a garden.  But all these hardships would be forgotten when the blossomed flowers are delightfully seen in the garden. 

    The portfolio that comprised with diversified stocks is also like this.  A frequent review is essential in this matter too.  Never miss the news related to economy, industry, company…etc.   The review based on these news will lead to realizing that weeds are present in the garden. Now it is the time for being cautious.  What we would normally do? We would book profit in the performing shares while holding the others. Which precisely means that what we are cutting and throwing is the blossomed flowers instead of the weeds. The investors who hold the least performing shares normally do is that they are looking after the weeds instead of flower plants.

     An investor who does like this should think at least this much.  Why these shares couldn’t perform well even though the economy and the share market exhibit a shining performance.  As the share market is handled by experts, if the investor community had at least an expectation of going up about the particular stocks, the demand and price of that shares would have risen up.  Did anything adversely happen for this company or its representing industry not to perform the stock positively?  This review must be done independently and only after that one should decide whether this stock to be kept in hand or not.  Instead, if the decision is, letting a stock to continue in the portfolio only because of its least performance, it will be a decision that is similar to allowing the weeds to blossom in the garden.

     The trees that don’t give any fruits must be cut down.  I wrote this much to remind the fact that it shouldn’t be the trees with good yield that to be cut down.  Remember, share market is a place that has no space for the sentiments of investors.  Therefore, instead of being arrogant that each share we bought must fetch good earning, it is relevant that thinking the investment in share market should fetch an overall gain.