Selling your winners and holding your losers !

It’s interesting to note that most investors are not comfortable holding a stock that has given good returns even when the index is struggling.

In one up on Wall Street book Peter Lynch quoted “Selling your winners and holding your losers is like cutting the flowers and watering the weeds.” 

 

Most investors can hold on to the losers and would happily wait for months/years to see it back in  green. Whereas the psychological fear of seeing the winners in the red will force them to sell all the winners.

I know a lot of investors holding on to Yes bank from higher levels (if not from ₹400 at least from ₹200 or ₹100) as they are attracted to their money.

This act is described by Peter Lynch as cutting the flowers and watering the weeds. 

 

A month back we discussed Som Distilleries around ₹105. The investors were worried when  the stock went down to ₹105 after rising to ₹110.

We conducted a quick poll on the behavior and we found out that only 11% of the investors are willing to hold on to the stock. 

 

Som distilleries technically have a resistance around ₹134, now we have to check if it crosses ₹134.

Analyzing the volume of the past 6 trading days it has been clocking higher volumes whenever the stock has gone up and recording lower volume whenever it’s down. 

It indicates street players are buying it now to take it to higher levels. Maybe it will go up now or consolidate and go up. Clearly no action is required now and we can comfortably wait till it goes above ₹134 or sink below ₹120. 

Since we have taken it at ₹105 there's a lot of cushion to give it a try. We know that rolling stone gathers no moss and hence we can sit on this trade.