How "buy and hold" guys lost money??

Usually people ask me-” I am holding xyz. The stock is down 50%. Can I hold it? I am a long term investor and can wait for next 5 years!”

If you listen carefully- you will know this is just another case of “not booking losses”. The investor buys the stock on expectations that the stock shall go up and when the stock starts to go down he can’t adjust himself to the “new reality” and finds it difficult to sell the stock. By saying that he/she is “long term investor” he is merely putting up a reason to avoid losses.

Just look at two stocks -Sasken communications and Mindtree Consulting. If you remember when these stocks were listed, the companies were doing good and their issues were hugely oversubscribed . But both these stocks have been in the severe downtrend for last couple of months. Infact, I had advised one reader in moneycontrol to sell Sasken while it was still at around 500 levels.And this had infuriated couple of readers! After all it was their darling stock. To me it was an expected behaviour as no one wants to believe that their stocks can actually go down! Who wants to buy a stock to take a “loss”?

Again this is a case of excellent managements and companies where the stocks have been underperforming. Infact Mindtree is below its IPO price! So if you are still holding these in the hope that they might recover some day, you might be in for some big surprise in the coming days.

Would you like to be a long term investor and hold this stock for next 3 years? Are you sure that these stocks won’t head to 100 or below? Are you sure that recession in US won’t affect these stocks in the telecom services industry? do you know that it took Infosys 7 years to regain its 1999-2000 price? Do you know that WIPRO stock holders who bought the stock at the peak of 2000 bubble are still sitting on loss?

Markets don’t care about future. Future is “unknown’ and “unseen”. It is best to remain in the “present”. Does’t everyone tell you to “live your life in the present”? Following trends is all about that! Those who can’t handle uncertainty can neither be good investors nor traders.


- SageCapital

perfectly well said.... I do agree.

Perfect....

Hi SageCapital,
Look at the movement in pricies of Deccan Cement(from 170/- to 130/- and now 340/-) INOX(from 150/- to 100/- now 180/-) and Vakrangee (from 240/- to 130/- and now back to 240/-). Sometimes holding onto a scrip can help you recover your money. RPL from 100/- (listing day) to 62/- and now at 220/- is another example.

Cannot agree more, make hay while the sun shines !!

the general perception now is that markets have no capital risk!...everyone says its a bull market and stocks will keep going higher...
the truth is its unpredictable no matter how great a technical analyst you are...the markets just humble you...
i love the markets cause they don't distinguish...they'll be rewarding at times and ruthless at others...
we all learn guys...

[quote=krishna23;147090]
the truth is its unpredictable no matter how great a technical analyst you are...the markets just humble you...

QUOTE]
wrong....
technicals r mirrors & mirrors never lie.....the charts r like the lifelines on ur palm....charts & chartists r always right....wrong may b ones inepretation....& thats why diff stoplosses for a same asset...
charts never wipe ur entire capital ,but a lay man is always @ higher risk...

well charts are right but they alone don't give one the full picture...
& chartists are NOT always right!

MAST WRITEUP MAN!

Absolutely well said. buy and hold is not a good practice unless you are willling to stake your entire investment.

Make the hay while the sun shines is really fine for normal investors. you cannot be greedy. book your profits and dont see where the stock is moving. if you are strongly convinced about the stock, you may re-enter again.

charts are fine. but they are not bible or geeta to follow without questioning. prudence is the key.