Why Booking Profits In The Share Market Is Very Important?

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Many analysts suggest that you should buy and hold shares and mutual fund units for the long term. Some others suggest that you should not sell shares unless you need the money. There are so many different theories that keep coming to investors, that many of them remain confused over whether to book profits or not.

Why Booking Profits In The Share Market Is Very Important?
Now, the best way to see whether you need to book profits and get out of a stock or not is to look at some examples. Take a look at some of the stocks that gave manifold returns in 2008 and if people did not book profits they would be sitting on colossal losses in 2015.

Name Price in Jan 2008Price in Aug 2015
J P AssociatesRs 229

Rs 11

Punj LloydRs 405

Rs 34

HDILRs 858

Rs 89

Punj LloydRs 405

Rs 34

Unitech

Rs 546

Rs 7

Gitanjali Gems

Rs 480

Rs 43

Bhel

Rs 569

Rs 248

Tata Steel

Rs 669

Rs 262

NMDC

Rs 446

Rs 101

Hindalco

Rs 180

Rs 108

Now, this is one side of the story. The other side of the story is that if you bought shares of HUL, HDFC Bank, Axis Bank, Yes Bank, Motherson Sumi etc., and sold them in 2008, you would have lost the opportunity to make manifold returns in 2015.

So, the question is should I book profits or not? One would be inclined to suggest that if you have made super profits in a short period of time you should book profits. At the moment the Sensex stocks are trading at price to earnings multiples of 22 times. This is horribly expensive and hence if you have made money in stocks it would be advisable to sell.

Making money in stocks is all about the timing. At the moment, since Narendra Modi has come to power, stocks have run up too fast. If you have made money you should get out of stocks and wait for buying opportunities at lower levels.

Yes, you may gain some and lose some in the process, but, that is how markets work. You cannot keep timing the markets to perfection. If you have sold something it is highly possible that it could go up further, while if you bought something it could go down further.

Anybody give you suggestion on perfect timing of buying and selling is playing clever. The fact is that nobody knows the perfect timing to buy and sell. If you have made money, sell and be happy with the profits.

GoodReturns.in

Read more about: hdfc bank, sensex, yes bank, unitech, hul
Story first published: Thursday, August 6, 2015, 9:13 [IST]
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