There are three ways we can sell or scale out a position
- Sell early or in other words sell into strength
- Sell late or in other words sell into weakness
- Sell at the absolute top
The first two options are known only in hindsight and the third option is a desire of many investors, but should never be the goal of a sensible investor. I know of no system where someone can sell at the top on a consistent basis (consistent being the key word)
All forms of investing and trading try to achieve an above average return on a consistent basis. So lets remove option c and focus on the other two options.
We have to pick our poison – Either sell early and leave some money on the table or sell late and see some of the paper gains evaporate. We use a mix of the two to minimize regret
For example, we sold some of Polycab, Apl apollo etc into strength in 2022 and 2023 and the balance was sold after we hit the peak and the stock started sliding. In these two cases, we sold some early based on position sizing and the rest once we hit the stoploss or due to some issue. In both cases, we achieved a decent return on the total position.
Both the stocks rose after we trimmed the positions in 2022/23 and polycab even doubled from our initial sale. For the portion we held on, we made a decent return but sold below the peak price
In effect, we had regrets after each transaction and that is the key point. No matter, what decision we make, we will have regrets. Sometimes the result of the action will be visible in months and sometimes after years (such as Balaji amines which went up 20X+ after we sold)
We are not trying to achieve perfection in any investment decision. We are trying to do a reasonable job and minimize (not eliminate regret).
This means that our transaction timing will be reasonable but never perfect, though we are making constant effort to improve the quality of these decisions
Disclaimer
- This report is published by RC Capital Management – SEBI Registered Investment Advisor (INA000004088).
- This report is for educational purposes only and should not be construed as an Investment Advice.
- RC Capital Management may have recommended the above stocks to our clients in the past. However, this is not a recommendation to buy / hold / sell the stock at the time of publishing this report.
- The securities quoted are for illustration purpose only and are not recommendatory
- RC Capital Management does not hold any position in any of the companies mentioned in the report at the time of publishing the same. Its partners may hold a position in this company in their individual capacity at the time of publishing.
- Neither RC Capital Management nor its partners have received any compensation from any company mentioned in this report for the preparation of this report.
- There is no conflict of interest for RC Capital Management / it’s partners due to publishing this report.
