To sell or not to sell ?Questions that traders and investors constantly asked themselves - Now that I am in the trade and have made some profits, do I sell now and lock in the profits ?
Questions that new traders and investors also asked themselves - Now price is so high, when is a good time to catch the low and get in or should I chase it higher ?
Today, we see many HK/CHINA stocks in a sea of red and I have shared before the psychological effect of RED colour on the human eyes. It creates a sense of URGENCY and the sometimes false Need to take action.
99.99% of the people when they see massive amount of blood will either frozen and not know what to do, some might faint while the more composed will quickly ask for help.
Same thing in trading/investment, people tend to sell fast and first when they see red in their portfolio, thinking it is better to have a bird in hand than worth two in the bush. What if I am wrong ? All my paper profits may go down the drain. And the latter is exacerbated if he/she has a string of losses prior to that so recovering whatever profits become a matter of priority and urgency to them.
I have highlighted here a few of my vested stocks and I am not selling for the simple fact that the business models of these companies are still very much intact. Yes, competition will get fiercer as more new players come onboard and also the China regulations might put a dampner on the stock price too. But, I view all these as temporary and any fall in price is a good time to accumulate.
As some of these stocks have run quite a fair bit (from 50-90% since March Low), it is totally acceptable to have some correction now. The pink circle depicts a simple analogy of the wave pattern that the price action moves in a chart, ie. wave like rather than a linear line.
It is hard for me to tell you to add more shares in an existing company that you have or use it to buy a new company. It is like if you have one red shirt in the wardrobe, would you add one more red shirt albeit a different design OR get a blue shirt for a change ?
If you buy a different company such as defence, infrastructure, etc then you are diversifying for stability and spreading your investment eggs across different sectors. Or you could go deeper into the value chain and acquire new shares of companies that operates within this vertical specialty. The latter works especially well if you have domain knowledge of an industry and know very well the competitive landscape, forecasts of the industry, government plans for this sector, etc.
Else, if you do not have the luxury of time to pursue such meticulous and granular details, an ETF that represents the top 10-30 companies in that field might be a good option too.
Again, I hope this thoughts of mine would benefit some of you in some ways when planning your portfolio. It can be much more fluid than you anticipated and customise it to suit your financial goals. Have fun :)
