By Sandeep Valunaj
Investors often carry forward every investment brand, platform, affected and even advisors to invest and invest quickly. However, there is little discussion to exit.
Most experts feel that selling is unnecessary:
“If the job is done correctly on purchasing a normal stock, it is time to sell it – almost never.” – Philip Fisher
On the other hand, practical voices like Zig Ziglar say:
“You don’t know when to start, but you should know when to stop!”
So, where is the truth? As usual, somewhere in the middle!
There are major landscapes here where it can be appropriate to get out of investment:
1. Achievement of goals
- Did you invest with a clear goal- repetition, buying a house, or financing education? If yes, get out when the target is near.
- Views to reduce the exhaust date risk as a change in low volatile asset classes.
2. Profit booking
If the objective was profit booking, evaluate whether it is present using the inverted framework:
- Price-to-Kami (P/E) ratio-if the historical or sector is above average, it can indicate overwalling.
- Price-to-book (P/B) ratio-a high ratio may indicate overvailing relative to the internal value.
- Concessional cash flow (DCF) analysis – If the stock price has reached its fair price based on future cash flow, then it may be prudent to get out.
- Reinvotion moves beyond intelligence and considers tax implications.
- During a market rally, maintaining exposure, selling it in installments to secure the profit.
3. Stop-loss strategy
- A stop-loss sets a predetermined exhaust point to limit the order loss.
- Example: If a stock is purchased at ₹ 100 with 10% stop-loss, then sell it at 90, preventing large damage.
- Set Stop-Loss levels depending on the investment type-an example of 5–15% for the vaporous stock, 15–25% for stable blue-chip stocks-align with your risk tolerance.
4. Underperformance
Get out of an investment if it continuously underperforms despite a proper recovery period:
- Mutual Fund – If it is behind the category partners and benchmarks, frequent.
- Stock – Red flags include:
- Revenue and profits decline.
- Increased debt level.
- Loss of market leadership.
- Issues of governance (eg, fraud, regulatory troubles).
5. Portfolio rebalansing
- A well -diverse portfolio requires periodic reinforcement.
- If an asset class becomes inconsistently larger, reduce the exposure in weak assets and reduce reinvestment.
- Example: If equities increase, selling some shares and realloling bonds can maintain balance.
6. Market and economic status
Macroeconomic shifts can affect investment feasibility. Consider reducing the risk in cases of:
- Increasing interest rates-areas such as-real estate and capital-intensive industries can weaken this scenario.
- Recession Indicators – A reversal yield curve or consumer spending decline may be warrant to get out of cyclic shares.
- Regulatory changes – new laws, tax policies, or regional rules can affect profitability.
Behavior
Many investors remain on poor investment due to psychological prejudices:
- Lack of damage – refusal to sell in a loss, expect recovery rather than rebuilding capital.
- Confirmation bias – ignoring negative signs and focusing only on positive news.
- Anchoring bias – fixing the previous high prices and opposing sales below that level.
As you can see, getting out of an investment is as important as entering one. Reviewing your portfolio from time to time and making objective decisions can improve long-term returns. If you get out of investment, consult a financial specialist.
(The author is the group CMO of Motilal Oswal Financial Services Limited. Recommendations and views by experts are their own. These opinions do not represent the views of Times of India)
