The art of investing in equity markets- when and how to sell?

Subscribe to enjoy similar stories. Investors are often advised to buy equity funds and to stay invested for the long term to achieve optimal returns. However, an equally important aspect—knowing when and how to exit—often takes a back seat or is overlooked.

There is no doubt buying quality equity funds and staying invested in them for the long-term will help generate optimum returns. Surprisingly, this may not be enough to achieve and realise these returns. Eventually, it boils down to when and at what levels one exits in the equity markets, which truly decides the trajectory of the returns.

As per historical data, investors who stayed invested over the long term and, sold equity funds during good market conditions at higher levels proved to be more successful in achieving and realising optimum returns. Also Read: Riders on the storm: Newbie investors get a dose of reality Ideally lumpsum investors are recommended to buy at lower levels and exit at higher levels and for systematic investment plan (SIP) investors the starting point does not matter much but are strictly recommended to exit during good market conditions at higher market levels. Let us understand this with an example.

Say, if one got lucky and bought BSE 100 TRI in March 2009 during the global financial crises (lower market levels) and sold in 2019 or 2020 before or after the covid fall (higher market levels), one would have achieved around 17-18% CAGR returns. However, if one sold in March 2020 during the covid fall (lower market levels) one would have only achieved around 12% CAGR returns despite of buying in March 2009 (lower market levels). On the other hand, if an investor started an SIP (systematic investment plan) in January 2008 (higher market