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POSTED BY ON July 18, 2011 7:10 pm ONE COMMENT
I am 27 years old. Let us say I have surplus amount of Rs. 20000/- per month for next 5 years, 10000/- per month for another next 5 years. I analyze,research and build a powerful portfolio out this surplus amount. But it is very awkward that I know what to purchase but don’t know when to redeem this surplus amount. Shall I keep it for lifetime? One thing I understand as my age grows, I need to shift funds from equity to debt. But how it should be planned?
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1. If you know how to analyze and research properly, you wont be having the issues of selling (mostly). If you know the reasons to buy a stock, and if those reasons are not there anymore, then you should sell. More often than not, you buy based upon tips, others’ recos, etc in which case you are seriously handicapped. As charlie munger said, any business is a buy at a particular price, hold at a higher price and a sell at an even higher price. So if you know the valuation of the business, you will know at which level the price is and take according decisions.
2. Its a widely held myth, that as you age, you should shift funds from equity to debt. This is an absolute non-sense. You use a particular vehicle (whether equity, debt, gold, alternatives, etc) based upon your requirements which do not actually depend upon age. With age, your requirements change which “may” lead to changes in portfolio structure, etc. Its not a necessity.
Hope this helps you.
Ramesh