The long term fundamentals based approach says that we should not try to time the market.
Lets examine this approach. Whosoever invested in say May to August 2020 reaped the benefits. This approach does sit well with the long term, fundamentals based approach. We are told Warren Buffet was willing to wait interminably for a stock to reach the level at which he would feel that the price was reasonable.
But here is the nub. If you stock has sunk, and upto that time you were fully invested, from where do you get the money for the purchase at the time of market fall?
So, this implies having liquidated some part of the portfolio, say in March 2020.
The question becomes important in view of the present day market volatility. I am invested in it upto my neck. So, do I sell some shares so that I have money in case the market really takes a dive?
Howsoever I try to look the other way, fact is most of my stocks are at lower than the purchase price.
I am not asking for a forecast. I also don’t believe in that sort of thing. But what should be the strategy if you feel that the market is going to take a tumble?
Add to this, coincidentally I am reading Dorsey’s Five Rules these days. While I was reviewing my transactions for 2022, I realised that my brokerage and taxes etc were more than the profits I may have made this year. Let me hasten to end that most I sell only the tanking shares, so mostly my actual profit is rather low.
That however, does not take anything away from the fact that it is silly to pay so much brokerage. So, buying selling, the itch for a churn in the portfolio has to be curbed.
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