Hey Friend

Every time when we see a stock we also see that is it overpriced or worthy or something like
that. NOTHING IS OVERPRICED.

1. If you like the fundamentals and see a long term growth then why worry about
the price.
2. When you are satisfied with your research or research of any person you follow
then even after correction price is going to increase and will go above your
purchase price.
3. If you’ll wait for correction for no reason then there are chances that stock price
will increase for no reason and will make the share more overpriced as per you.
4. Don’t worry about the price if you are investing in a good share with strong
fundamentals. No matter if it is overpriced because what matters is it’s growth in
upcoming years.
5. Be sure and confident with your research and invest without thinking twice even
it is overpriced.

Is it a good idea to hold good stocks even if the overall

market is overvalued, assuming their long term story is
intact? Should one sell some part of these stocks and wait
until the market falls, or continue holding them and ride the
entire cycle?

Yes it can be a huge mistake to sell a great company just because it’s temporarily
overvalued. The best companies and best managers usually surprise on the upside. They
come up with products, services and solutions that nobody has ever dreamed of. Successful
companies have a habit of reinventing themselves and pushing further and further. Sam
Walton himself said that he could have never predicted the growth of Walmart and there
are many historical examples like that.

In the 1970s, the investment community believed that McDonald’s had nowhere to grow.
Then they came with the Egg McMuffin and opened the first drive-thru in 1975. After that
the famous Chicken McNuggets followed in 1983, with salads added to the menu in 1987.
The McCafe concept was launched in 2001 and the company just grew and grew. Then they
found out that people like to eat cheesburgers after a couple of beers, so they started
operating on a 24/7 basis and grew even further. During this period, McDonald’s competed
with many other fast food joints like Burger King, Wendy’s or KFC. Who could have
predicted that?

If you have purchased the right company, it will keep making new highs in each new
business cycle. You might sell a part of your position fearing that the next bear market is at
the door, but what if it doesn’t come? Or what if it comes and it’s only a 20% decline like
last December? How do you know when to buy back?

Consider the example of Buffett’s investment in Disney. He bought Disney’s stock in 1966,
acquiring 5% of the company for $4 million. That same year in December, the founder Walt
Disney unfortunately passed away. Buffett sold his stake a year later in 1967 for $6 million or
a 50% gain in 12 months. The company experienced a “lost decade” in 1970s, but by 1980s
started growing again. Just a few weeks ago Disney’s stock hit a new all-time high and its
market cap stands at $241 billion today. A 5% stake would be worth around $12 billion.
Who would have predicted that their acquisitions of Marvel Entertainment and LucasArts
would be so successful? As mentioned before, really great companies have a habit of
surprising on the upside.

Then there is Grinnell College, which was one of the original investors in Intel in late 1960s,
acquiring approximately 10% of the company for $300,000. The school board later sold the
investment for $14 million in 1974, fearing a further drop in a bear market. That stake would
be worth tens of billions today.

As Phil Fisher wrote: “Once a stock has been properly selected and has borne the test of
time, it is only occasionally that there is any reason for selling it at all.”

The main job of an investor is to buy an outstanding company, and then hold it for as long
as it remains great. If you sell a part of your position everytime there is a bear market scare,
you will never realize the large gains that common stocks sometimes offer.

I think that you should sell stocks only for these 3 reasons:

1. You realize you’ve made a mistake

Sometimes you do a lot of research and everything looks good, but the company just isn’t
delivering as you expected it to. Maybe the fundamentals of the industry have changed, or
management is not very honest or you have paid too much for the business. In any case,
when you see you’ve made a mistake, just get out and look for the next opportunity.

2. The company is no longer great

Companies usually go into decline due to two reasons: management complacency and
market saturation. Some businesses become so successful, that they think they are
invincible and they “deserve” success. They forget why they were successful in the first place
and how they achieved it. Or sometimes old managers retire and the new ones are not as
good as the founders.

In other cases, companies get so big that they find it very hard to grow. Once they have
depleted their opportunities, they start squandering capital on acquisitions that are
completely unrelated to their business. That usually ends badly, so it’s ok to look for another
investment when a company becomes too large and bureacratic.

3. You have found a much better opportunity

This one is really tough, as you find a new stock that you are excited about and must sell
something in your portfolio to make room for it. In essence, you are selling a stock you
know a lot about, and buying one you know little about yet. Extra care is warranted, as you
don’t want to disturb or sell a position that will continue to grow for years.

When do I sell a profitable stock?

Stock Selling Strategies and Knowing When to Sell

Here are my reasons for stock selling in no particular order:

 You made a mistake in judging the company

 The company fundamentals have changed
 A better value or opportunity comes along
 The need for emergency cash
 Too far above intrinsic value
Acknowledging a Mistake

I believe this to be one of the key psychological barriers that an investor has to break in
order to be successful. You have to be honest with yourself and remember your mistakes.
Nobody wants to admit they are wrong, but as human beings, we are wrong quite often.

Too often, investors know they’ve made a bad decision but choose to hang onto the losers
until they can at least break even or come out with a tiny gain. This usually leads to a larger
loss. If that stock is able to break even and we sell at that point, our mind does not
recognize this as a shock. This bad decision eventually gets swept away only to be re-
enacted at a later time.

If we know that a mistake has been made, sell.

Change in Business Fundamentals

This is pretty self-explanatory. If a fashion company decides to start expanding or change its
business to the agriculture industry, then we have a problem. Sell.

Better Value Investment Ideas

Investment is defined as

The investing of money or capital in order to gain profitable returns, as interest, income, or
appreciation in value. – dictionary

If the reason we are investing is to obtain profitable returns, doesn’t it make sense to sell a
current investment in order to invest in a better, more profitable opportunity?
This is not just limited to stocks. You could find better value in real estate, bonds, coins, cars,
antiques etc.

Better value knocking on your door? Sell.

Sell Stocks for Emergency Use

Life brings all sorts of situations. If you are in need of emergency cash, there is no real
reason to visit a loan shark or bank to borrow money that you may already have.

This is a hard situation to call, but if this emergency is extremely urgent, sell.

Over priced and Valued

Intelligent investors monitor their companies, not the stock symbol. We understand
that all companies have an intrinsic value. If you bought a great company at a discounted
price and the price has now reached the intrinsic value, you could sell or hang onto it
because you can fairly expect to receive a certain rate of return from your intrinsic value
analysis

But due to Mr Market’s craziness, say the price of the company shoots beyond the intrinsic
value. Selling in this type of scenario is also psychological. Your greed is nudging you,
grinning and nodding, telling you “you know it’s going up further”. If this ever comes
around, halt, and reread or rethink your analysis and get back to basics. Price follows value,
and if the price is pushed up due to speculation and hype, price will eventually meet value.

You would be crazy to not sell a house in a bum neighbourhood if someone offered you
$1,000,000. You may think you could get more, but when the dust settles, price follows
value.

Comments Regarding Psychology and Selling

A quick scenario.
Say we need emergency cash and need to sell. We have the option of selling either stock A
or B. A is up 20% and B is down 20%. Which one would you sell?

Most people will sell A which is up 20%. Why is it that we hold our losing stocks far too long
and sell our winning stocks too early?

This is because we view A and B differently. We evaluate the selling price in terms of gains
or losses. Regarding loser stocks, we don’t want to close our mental state by selling and
accepting a loss. This leaves our mind in an uncomfortable state we do not want to
acknowledge. However, selling at 20% is done without a thought. Why? Because we happily
close our mental state on a stock with a gain.

But how about this. If B is down 20%, it could be from a misjudgment in purchase or
company or because the company isn’t doing as you expected. Then, why not sell B at a
20% loss, and let A who is up 20% (for a reason) continue to do its good things to give you
a greater gain?

Remember, if a company is down 50%, the price has to increase 100% before you break
even.

With Indian stock market at all time high, which stock one
would prefer to invest in and why? Should one wait for lower
share market or invest in now?

I started investing an year back and I slowly I learned that the Indian stock market was at an
all time high. I really did not know what it meant. In media, we constantly see references to
NIFTY reaching record highs, I tried to understand the same and found that the NIFTY index
alone should not be used to interpret the stock market bubble at any point of time. I found
that NIFTY P/E is a much better measure of understanding whether the markets are heated
up or not. I have written about it in detail here - Krishna Bharadwaj's answer to Why are
some expecting that the Indian stock market is going to crash?

Which stock one would prefer to invest in and why?

I don’t think I am in a good position to recommend stocks, however I can answer the next
question.

Should you wait for lower share market or invest now?

While it would be suicidal to put in a lot of money when the NIFTY PE is so high, it is smart
to invest smaller amounts from time to time. Most investors see economic slowdowns as an
opportunity to invest. While it is not entirely wrong, but not investing from time to time and
looking forward to such events would be foolishness.

Let’s assume that we felt that markets were high sometime during June 2014 and decided to
not invest, we would have lost substantial returns even with some of the safest stocks like
HDFCBANK - 122% (30% CAGR)

I would like to end this answer with a famous quote from the legendary investor - Peter
Lynch:

Far more money has been lost by investors preparing for corrections or trying to anticipate
corrections than has been lost in corrections themselves

Should I now start buying more shares or wait for a bigger

fall in the stock market (29/03/2020)?

Well no One in the stocks market can ever tell you that how much market will fall or what
level do we start buying from, Literally no one can tell you!

It’s been years that market is been showing ups and downs,

Like 1 and half month ago market was at a life time high and experts on t.vs and
everywhere were giving the target of 13000–13500 on Nifty. Once it started falling
down the same people turned bearish putting up target of 600–6500 on nifty.

So no one knows until what extent it will fall.

It is all upon us that how we manage the situation and our investments in such time.

People started mutual funds investing like 3–4 years ago, and accumulated some
returns are 0 now.

Different people has different aspects to watch market and predict.

One thing you can do in this market, investing step by step.

You are your own analyst!

Pick up your own stocks for longer term!

Invest in 5 different parts, For E.g.

Today market is at 8200 invest 20% of amount.

If market goes 8000 tomorrow invest 20%

If it falls more go for another 20%.

If it again comes up invest another 20%

And 20 whenever you feel like.

This is the way you invest in stocks market, Don’t put all your money together on someone’s
advises.

Its your money! Invest wisely!

The stock market doesn’t fall: Individual things within the system fall or rise.

Domino’s Pizza is doing great right now. Clorox seems to be doing well, too. Grocery chains
(Costco, Kroger, Sprouts) are having a great month so far.

But this doesn’t matter.

Right now.

This moment.

Anytime some event occurs, we call this the point at which the market  crashes. This isn’t
true. The market doesn’t crash. The stuff that fall are due to the perception that a company
can’t meet whatever earnings they said they would. Whether or not that perception
materializes in the quarterly earnings is yet to be seen.

Right now, people are scared. A market isn’t something to wait for to crash more. People
waiting for a market to crash wait a long time on the sidelines.

For the last 7 years, my portfolio has earned nearly 400%. Some stuff I sold because I
thought their prices had reached maturity. Some stuff I held fell quite a bit. Overall, I’m still
up a lot.

Because my theme never changes.

You shouldn’t care about the market.

You should care about what you’re putting your money in.

Nobody goes to their brokerage account and places an order for ‘the market’.  You place an
order for some financial instrument for a security you want to transact. If your choices are
wise, it won’t matter whether you bought them in January, February, or March. Timing isn’t
something that falls into the equation.

There is a saying; “sorry if you do, sorry if you don’t.”

If you go for it and your investment immediately plummets, do you panic or immediately
regret your decision? If you do, ask yourself why. Did you stop believing in the company
because other people did, too? If your reasoning to buy into a company is tied to the
reactions of others in the marketplace, your skin might be too thin for the public market.
Netflix reached around $50 a share in 2009 before falling down to $7 in 2011—this was a
loss of nearly 90% of their market cap. For that downhill to occur, a lot of people had to sell
their stake. Everybody who held their stock at $50 and believed in Netflix probably also
bought stock as it fell toward $7. Today, Netflix trades at nearly $400 a share. Whoever held,
regardless of where, made a lot of money. Every successful company goes through many
tests and stressors on the market. That is, quite literally, the virtue in patience. The first part
of my statement is silly; those who buy and believe never feel sorry just because their
company suffers a temporary hit. They find that as an opportunity to buy more.

The second part is far more realistic. You find yourself looking at bitcoin when it is $100 and
you think it is too expensive. You see yourself looking at AMD but it is $2 a share. You look
at Amazon in 2001 at a single digit share price. You see Netflix at $10 a share and you could
see it go bankrupt even though it has 30 million subscribers. You think all these things are
overvalued. You want them to keep falling a bit before you place an order. You wait. They
go up. It’ll implode, you think. It falls a bit, but then skyrockets farther up. You wait because
it’s going to blow up, of course. Again, it cycles a bit down before it skyrockets farther up.
Years pass, Amazon trades at $2,000 a share. AMD is at $40. Bitcoin trades between $5,000
and $20,000. One day, Bitcoin reaches $100,000. You keep waiting. You’re older now. Still
waiting.

There is always going to be a next week.

There is always going to be an absolute low.

If people knew what that was, they’d all just buy at that spot. The truth is nobody knows
what that is and the last time I checked, I never personally knew a psychic to help me with
this problem.

You’ll see massive volume in trades for stocks on any given day. You’ll hear massive
amounts of people thinking  they got something at the very bottom. Their purchase
continues to drop, so they sell in fear.

At the end of the day, you’re investing in the belief that your dollar is going toward a
business that will use it to expand their revenues over time. If you believe in the philosophy
of your investment, you don’t need a next week.
If you need a next week, you need to sit down and think of better ideas.

The irony in timing is that no one has the correct  predicting power.

When-should-I-sell-the-stocks-and-buy-stocks ?

Purchasing stocks of a high-rated company is not the only criteria. It is important for you to
get a better understanding of the market through self-experience. Do not rely on the
experiences of other investors as their lucky upsides can result in your downfall.

We opt for investing in share markets in order gain more from better returns and not for
losing out on our savings and entering into a debt of procuring a personal loan or a home
loan, etc. ,in future, to finance our requirements. In order to benefit from the highs of the
market and protect yourself during the slumps, you should know how your stocks need to
be traded.

Change in company fundamentals

At the time of purchasing shares of a company, you might have done a thorough
background check about its credibility, fundamentals, etc. But after a few years, luck may
not favor you if a new competitor enters the market and gives cut throat competition to
your organization. In such cases, it is time to reassess the company's worth and find out
how beneficial things are for you in such change of events and reconsider the option of
holding onto the shares of that particular company.

Price shoots up too high too soon

Remember, the most successful investors are also among the most humble ones. If the
stock prices just shot up to about 20-30 per cent more than the price you paid to acquire it,
do not be greedy and consider it to be one of the best decisions. A prudent investor will sell
off those shares at that point of time when its price reaches the peak, as there are chances
for a crash in the prices in such cases. Investors should consider pulling out only if their
profit target has been reached. If one keeps selling in spurts, one could miss out on
prospective multi-baggers.

Stock price drops below a threshold level

After purchasing your shares, if you realize that your stock prices have gone much lower
than the expected level, it is best if you can intervene and withdraw your shares before you
enter into a huge loss. Experts usually advocate a 15-20 per cent stop loss, depending on
your risk tolerance level.

Better opportunity
If you think that shares of Company A are performing better than those of Company B, you
reconsider your decision and withdraw your shares from B and invest in A. Investors should
keep an eye open for the way that the earnings season pans out and make their moves
accordingly.

Portfolio re-balancing
Apart from all these market factors, personal factors are also important when it comes to
selling shares. Over a period of time, you may find that your asset mix has become
unfavorably skewed and is not aligned with your risk appetite. Perhaps, the mid-cap stocks
in your basket have had a phenomenal run over the past year.

You don’t.

If you want to know when the market is going up or down, it’s impossible for the average
investor to tell. Even professionals who study the market full time are only right about 55%
of the time.

Best strategy is to buy, diversify, hold, rebalance.

Good lord man, you could fill a room with books on this topic. There are companies with
supercomputers rivaling military intelligence agencies and armies of PhDs trying to figure
this out.

If you’re thinking you want to know this for trading purposes, I advise to forget it. You can’t
beat these guys. You’re not on the same field. You’re not even playing the same sport.