In other words, once you have invested in ‘excellent businesses’ there is no real reason to sell, when while the businesses are doing well.
Let us look at a few of the many eye-popping examples:
* HDFC Bank appreciated 15.7 times in ten years from Rs 215 (FV Rs 10) on January 1st, 2003 to Rs 675 (FV Rs.2) on December 31st, 2012 i.e. 31.7% returns per annum
* Asian Paints appreciated 20.5 times i.e. 35.2% returns per annum during the same ten year period.
* Shree Cement appreciated an unbelievable 92 times i.e. 57% returns per annum
* Siemens Ltd. appreciated 21.7 times i.e. 36% returns.
Unfortunately, the general trend in the markets is to buy stocks, not businesses. The entire focus is on shares and their prices. People are often not aware of the businesses behind the stocks they own. How can they be when they have never done any research?
Too lazy to work hard and uninterested in acquiring knowledge, they have developed an attitude to depend on others like broker’s recommendations, experts’ opinion and friend’s tips or in the worst cases, chance remarks overheard in local trains/at parties. I wonder if they have ever wondered what Normal Augustine wondered “If stock markets experts were so expert, they would be buying stocks, not selling advice.”
I understand it is unrealistic to assume that people will henceforth start researching before investing. They would continue to buy ordinary shares, at extraordinary prices and finally pay a heavy price for their indolence and ignorance.
If that be so, it is important to have a selling strategy.
The bottom-line: Be ready to change the tune from ‘good buy’ to ‘goodbye’.
...Know when to sell your shares / mutual funds in my forthcoming publication 'Your Guide to Finance and Investments'.
