MF Query: Profit Booking vs Staying Long Term?

[point00]

Hi Guys,

I think this question in quite generic and a fresh look from experts on this may help me and other members of this community to decide the fate of our Mutual Fund holdings.

I want to know a good workable strategy or opinions on the profit booking w.r.t. Mutual Funds.

- Is it wise to have a lower cut-off for returns (say 40%) for MF's and once a fund crosses the lower cut-off, one can start booking profit?

- Is it wise to stay invested till the time one doesnt really need the money for some other purpose? (But one may end up with lower returns even with a long tenure of investments - say 10yrs etc).

- Is it wise to atleast have your investment stay in market for a minimum fixed period of time (say 5yrs). Only after that one should book profit at an appropriate time? Will the return over 5yrs or more usually be more than returns over say 2yrs time?

Or may be some others .....

Different friends are giving different opinions about profit booking in Mutual Funds, so thought of posting the same question to this forum.

I tried to find similar posts, but no success. In case the same is already discussed and you are aware of the old thread, please point me to the correct thread.

I kind of agree that we may not have a definite answer for such a query, but I am sure some experts will have great opinion some data which can help make a decision at times!!

Thanks!

 

[milind]

You just have to look at a chart of S&P 500 on google (or your favorite index) for period of 15 years and slide it around.

- It took a full decade to recover from 70's oil shock
- 80s-90s relatively trouble free. I think much of buy-n-hold theories got developed in this era
- You still may or may not have recovered yet from "irrational exuberance" of late 90s depending on which index (S&P500 barely recovered, NASDAQ nowhere close)
- 2007-8 recession lost 50-60% of the value from 2007 peak. Its not clear how long it will take to get back there

So I don't believe buy-n-hold works in the grand scheme of things unless you were thinking of investing for inheritance to grand kids 50 years down. Some kind of market index based stop losses will be required to cash in, in case of recession. At the same time, I don't believe timing the market on small scale works either. So one has to find own comfort zone.

-- Milind

Hi Guys,

I think this question in quite generic and a fresh look from experts on this may help me and other members of this community to decide the fate of our Mutual Fund holdings.

I want to know a good workable strategy or opinions on the profit booking w.r.t. Mutual Funds.

- Is it wise to have a lower cut-off for returns (say 40%) for MF's and once a fund crosses the lower cut-off, one can start booking profit?

- Is it wise to stay invested till the time one doesnt really need the money for some other purpose? (But one may end up with lower returns even with a long tenure of investments - say 10yrs etc).

- Is it wise to atleast have your investment stay in market for a minimum fixed period of time (say 5yrs). Only after that one should book profit at an appropriate time? Will the return over 5yrs or more usually be more than returns over say 2yrs time?

Or may be some others .....

Different friends are giving different opinions about profit booking in Mutual Funds, so thought of posting the same question to this forum.

I tried to find similar posts, but no success. In case the same is already discussed and you are aware of the old thread, please point me to the correct thread.

I kind of agree that we may not have a definite answer for such a query, but I am sure some experts will have great opinion some data which can help make a decision at times!!

Thanks!

 

[point00]

Thanks Milind...
Yes I agree that more or less one has to find his/her own confort zone or level.
Thanks for your reply.

Also I must say that I got a lot of information by reading other threads in this forum.
So now i can say that this forum is a wonderful place to be in and some really knowledgeable people around to seek opinions and help from!

Great effort by Traderji! Great work guys!

 

[AW10]

You just have to look at a chart of S&P 500 on google (or your favorite index) for period of 15 years and slide it around.

- It took a full decade to recover from 70's oil shock
- 80s-90s relatively trouble free. I think much of buy-n-hold theories got developed in this era
- You still may or may not have recovered yet from "irrational exuberance" of late 90s depending on which index (S&P500 barely recovered, NASDAQ nowhere close)
- 2007-8 recession lost 50-60% of the value from 2007 peak. Its not clear how long it will take to get back there

So I don't believe buy-n-hold works in the grand scheme of things unless you were thinking of investing for inheritance to grand kids 50 years down. Some kind of market index based stop losses will be required to cash in, in case of recession. At the same time, I don't believe timing the market on small scale works either. So one has to find own comfort zone.

-- Milind

On the similar line, look at the example of Japan Market (maybe UK/EUROPE mkt is also following it) and see the pain of buy-and-hold investor who did not know when to leave MFund and protect the asset.

One can always say that it can never happen in India, We are growing country etc etc.
But was the same thought flowing in Japan in 60-70s and US in 90s-00s. IMO, it is the cycle of economy and human behaviour which repeats time after time at different places. I hope it doesn't come to our market but even if it has to come, better be prepared than to be sorry at the retirement age to find out that your asset level is back to the level when u were 40 and cost of living has gone up lot more than that..

I used to be buy-and-hold guy during dot-com boom and doom.. but learnt the lesson and now shifted my approach.

Happy Trading

 

[life2007]

Hi Point00

You can refer the below link with similar query. I learnt a lot especially from Kenfrapin's post...

Hope you get something out of it.....


http://www.traderji.com/mutual-fund...al-funds-investment-strategy-help-please.html


regards

Jeet

 

[point00]

Hi Jeet,

Thanks for your reply.
I have gone though this thread you pointed out (along with few others) and indeed this was very helpful.

Regards