Profit booking

#1
dear SIRS,
i want to know that whether PROFIT BOOKING is recommanded or not..?
if YES,what should be IDEAL WAY of it...
pl guide me as i had terrible time in 2008...
thanks...
 

nikrod

Active Member
#2
dear SIRS,
i want to know that whether PROFIT BOOKING is recommanded or not..?
if YES,what should be IDEAL WAY of it...
pl guide me as i had terrible time in 2008...
thanks...
In MF's profit booking is not recommended as it is long term investment vehicle. One way to book profits is going for Dividend option. Fund manager will distribute the profits when it suits them. Usually dividend payout is annual.

Booking profit is an individual decision. If you are a knowledgeable investor and feel that market has overheated in a bull run, you can decide to book profits. But do not try to time the market too often.
 
#3
I agree with above opinion. If u feel market is heated, stop the SIP first and divert to one of the debt fund.. If u feel market is overheated( and sitting with nice profits) consider partial profit booking.. never take fully.. When market falls start your SIP again .. Also gradually transfer the debt fund amount to euity MF when market continously falls
 
#4
I would say a good time to redeem MF is in Nov-Dec period.

Besides the best way to redeem is ---get the prinicipal amount from MF AMC and let the profit run.. say you have invested for 10k and as of now the total is 12k , you may withdraw till amount 10k and let the remaining 2k be there and earn you some profits.

:)
 

nikrod

Active Member
#5
I would say a good time to redeem MF is in Nov-Dec period.

:)
If you are a long term investor, redeeming money should only happen in case you need it. Do not redeem based on which month of the year it is.

Although one should not try to time the market, the overheating or bearish phases can be detected with comparing Index PE ration with historical averages. For Indian market average PE is around 15 forward earnings. In bull markets of 2007-2008 Jan, it reached 22. That was sign of market getting over heated.
 
#6
Yes I absolutely agree with NIKROD... you should not try to time the market (if experts seldom can who are we..?) but you should be aware of time period good for redeeming them to re-balance the portfolio just in case you need to..
 
#7
Agree with Nikrod and others. Profit booking is expensive too (1% in most cases if redeemed within no exit period). Use index funds if you want to play with profit booking each time market rises.
 

nikrod

Active Member
#8
Agree with Nikrod and others. Profit booking is expensive too (1% in most cases if redeemed within no exit period). Use index funds if you want to play with profit booking each time market rises.
If you add Short term capital gains tax of 15.45%for investments withdrawn within 1 year, redeemption becomes over expensive. Peter Lynch calls Capital Gains Tax a "SEC Bear Market". :)
 
#9
thanks SIRS...
One more doubt:if i have profit of 5000 on investment of 10000 & still i should continue Or do profit booking of 7500 & let rest to be there? i think probability of market going +/-20% from here would not only limit my profit but also LOSS..i think minimizing probable loss should be considered (stastically?)
thanks
 

simple_trader

Well-Known Member
#10
As per my understanding, if you have invested in MFs, do not try to time the market. Re-deem only if you need money. Plan them well before. Good way to redeem is you do STP to some debt fund first for a few years, say 2-3 years. Once STP is completed, you redeem as when you need fund (redeem as much as you need). Avoid trading MFs.
 

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