50- 50 % strategy

Hi Experts

Please share your view on this strategy

Say you have 20/25 odd stocks. 50% are for long term holdings where you expect few of them to be multibaggers.

How about other 50% to be traded at 5-7% profit on monthly/ weekly basis. Say if we keep on booking less amount of profits ( upto 4/5/6/7 %) and then reinvest the money into some other stock and look for another 4-8% profits. This churning could be done as many time its possible.

Could this strategy be a profitable one? not sure if this makes sense to many.


Please share your thoughts.

Regards

Amit

 

Amit, I am completely with you on this!.

I am not sure who (was it Peter Lynch?), but some one mentioned in his interviews that he made pennies from buying and selling stocks with a diff of 10 Bps and these profits enabled him to build a large corpus to invest long term.

1. The only down side here is, there are several times when the stock will move 5% or 10% downwards from your buy price. You will have to either book losses or have the stomach to fathom that volatility.

2. Given that transactions can now be traced to your PAN, you will have to be tax compliant. Capital gains might reduce your profits

3. If a stock moves 15% down, you may get stuck with it for a long time and along with that your capital.

In my experience having a core set of 2-3 stocks just to trade would be really worthwhile. (You will actually have a good pulse around those stocks and you could actually predict them better!).

 

Hi Abhilash,

Thanks for your views. That was the idea - if I don't have EXTRA income earn it from market and re invest it. This is what I think on the points you mentioned above.

1. The only down side here is, there are several times when the stock will move 5% or 10% downwards from your buy price. You will have to either book losses or have the stomach to fathom that volatility -

---------Why wait for 10% loss- exit at 5 % if you are looking to make not more than 5%.

2. Given that transactions can now be traced to your PAN, you will have to be tax compliant. Capital gains might reduce your profits -

---------There is no running from this one

3. If a stock moves 15% down, you may get stuck with it for a long time and along with that your capital

--------As per point 1 - Why to wait till 15% downside. I think 5% is good enough.


I think 2-3 stocks is good to start with - eventually it depends on how much one can handle. I would not look at day trading - it would be more like week or month trading

I would be happy if I get around 4-5 % per month post tax/ loss booking etc. That would help to built a a decent corpus in times to come. I think hoping for 4-5 % per month is not much

 

I can add my experience here.

I had cash for 240000 Rs. I wanted to split it into 4 , invest 60 k into 4 stocks.
Mostly the stocks will be from nifty 50.
Go to ET, sort the nifty 50 by monthly returns and you get which stocks, went down by 20-30.

Make a big assumption(take a leap of faith) and invest in one of those good stocks.

By good stocks I mean, Hero or Bajaj, TCS, HCL tech or pharma stocks. I dont touch banking stocks or stocks like hindalco, metals etc. mostly defence stocks, IT, FMCG, Auto etc.

The wait for the stock to go up by 15 %. Waiting period is 3 months.
Basically I wanted to run my portfolio like a company. MEasure performance every quarter and see how it is growing.

However it doesnt work exactly that way. Some times after you buy a stock it starts going down. Now you are stuck. sometimes that stock doesnt move at all. There also you get stuck.

So, if you are aiming at 4 , 5 % profit, you give 2 % to brokerages and some money as tax.
You will barely make any money, despite taking the risk.

In the worst case scenario, you will even end up losing money, even though your other 50 % long term is doing good and your networth is still flat.
Not worth that risk. I suggest you play with 5 % or 10 %. Not 50 %. That is not a good idea.

 

Perfectly said - Agreed-
One Can start with less amount. There is a risk involved even with 5% or 10% play,
Depends on how much one is willing to look at Risk-Reward ratio.

My selection would not only be Nifty 50 - it would also have good Mid and small caps.

 

Dear Amitk
20/25 Odd stocks and 50 % are for long term is ok

but my question is 4/5/6/7 % earning in equity trading in every month with consistency
is biggest question mark ? ? ?

ex: we know our self how many months we are earned continuously every month 4 % profit
hole year return is 50 % in year in " Equity segment "

it is a big return in equity segment

if we try for some stocks buying we are looking for profit , but if 4 % stocks come down what is our steps
i am trying to explain my experiences at the time of 1992 harshad mehta scam before 2 years
i calculated my profits and i thought if this profits continue i will become billionaire year with in 15 years , i keep on in day dreams
after crash in 1992 my capital loss nearly 50 % and i learn major lesson from market
at the age of 19 years

after that i never think like that .....

ex : questions :
1. what is our consistency profit returns in last financial result ?
2. how many times change our long term investment plans in last year ? is it good reason ? or our emotions are main factors ?
3.are we having any short term trading setup or strategy ?
4.In loss situations what is our psychological situation ?
5.are we having " Panic or Greed " ?
6.are we having " Emotion less " Trading strategy ?
7.are we having accept our mistakes and errors in trading honestly ?
if yes how many times in a year ? if yes shall we write in a paper for our own knowledge ?
8.are we maintain trade or investment dairy with honesty ?
and so many questions ???
9.are we place " stop loss "each trade or investment ? or not ?

but my efforts are only to get perfection in our members
if some may be realistic in your view but not all questions ?

but we appreciate positive thinking in amitk .....

we should Aim for big targets but our efforts are also high ....

ALL THE BEST BROTHERS

 

you might as well consider trading equity derivatives, commodities, currency futures (avenues to trade) since the objective is to earn profits

a couple years ago at a former company, there was this guy who traded in F&O and in cash markets for just a few paise difference - his explanation was the portfolio provided for margin and he was looking to make good losses incurred trading F&O (all the money was his father's)

the more you trade, the happier your broker is and the more money they make

trading (only in equities - cash) i've been doing it lately and a few good trades but some bad trades wipe out the profits & @Abhilash Padival 's 2nd point of taxation is exactly what our broker of 15-20 years told me, just your PAN and they got all our details, still a long way to go from the way it is in developed markets
brokerage is a big factor if you are considering trading, i'm closing my IIFL account and considering a discount broker like Zerodha or RKSV - flat ₹20 brokerage

 

Thank you all for your inputs. Quite a few eye openers.

@ Rama Sir - I know the efforts are high and although I don't have answers to all your questions I believe 3-5% profit on avg per month is not impossible. Say you end with with 2.5-3 5 % ( or even lesser) profit after taxation and brokerage.

@ Bombay Boy - There is no way out Taxation and brokerage - but its a great idea to consider trading equity derivatives, commodities, currency futures

Moreover, I don't expect all my stocks to be in profits always, in similar ways - I don't expect to be in loss always - inst that correct? One would never know for the fact if they have not tried. I believe all these opinions are based on assumptions.
The aim is to EARN profit however small it is - to built a bigger corpus to re invest. So if I invest 2.5L and earn 1.5-2 % net profit per month on avg.... it still helps. I don't deny that every month may not be as what would I expect - still worth a try

( I wonder if keeping 2.5 L in FD for a year would be a better option then )

 

@ Amitk: I have been using this strategy for long time. In my portfolio, 70 % I have alloted for long term investment. Remaining 30% i am using for delivery trading. Like you mentioned, I used to buy share when there is a correction & sell it when it goes up. But I felt this strategy will be dangerous if you buy blindly any company. Ametek auto crash was a near miss for me. Pls consider advice from Rama sir since he is a senior & experienced person over here.
NB- I just shared my experience over here so that it helps in a creative discussion.Pls don't follow this idea as there might be people who have lost in this strategy. Comments are welcome.
One recent Eg: Dishman pharma went to a high of 389 & then fell to 346. I bought for 346 & sold for 405. Now don't ask me how come I knew that dishman will go up. But sometimes there are chances that u will get trapped at higher price. Play safe.cheers.

 

Thanks Warrenbuff77. I noted Rama Sir's advise already