Buy Sell Hold in Share Market

Monday, January 25, 2010

The "Buy" decision has two important steps: Step one allocates the available investment assets, by purpose, between Equity and Income securities, based on the goals of the investment program. It is done best using The Working Capital Model. Step two establishes strict selection quality measures and diversifies properly within each security class. Investment Grade Value Stocks are the low-risk equity champions; long-term, non-gimmick, managed CEFs produce the best income/diversification mix available in readily tradeable form.

The "Sell" decision involves setting reasonable targets for profit taking for all securities in the portfolio. Loss taking decisions must not be undertaken out of fear, and must be avoided during severe market downturns. Understanding the forces causing market value shrinkage is important and a highly disciplined hand at the emotion control button is essential. There is no such thing as a good loss of capital.

The "Hold" decision is most common, and it regulates and moderates the process, keeping it less than frantic. Continue to hold onto fundamentally strong equities and income securities that are providing their normal cash flow. Hold weaker positions until the appropriate cycle (market, interest, economy) changes direction, and then consider whether to sell or to buy more.