The many flawed equity investing rules of retail investors that don't stand up to scrutiny when it comes to earning real returns
equity for a long period of time will have personal experience to vouch for the simple approach of holding a diversified portfolio that is managed to weed out losers. For everyone else, such advice is simply theory.
This is because they have made their own rules. Everyone who has dabbled in equity investing has had good and bad experiences. They deem these to be their best teachers. The lessons are shared with others, who also draw similar conclusions. The commonality of experience is enough, in many cases, to overtly generalise. Many rules are formed in this manner and usually narrated with great conviction.
This one ranks at the top: one must not be greedy, and one must book profits. This position typically comes from the experience of being with a stock (not portfolio) that ran up in a speculative frenzy, and then crashed. It is also the lesson many investors take from the benefit of hindsight when the equity markets fall. If only I had booked profits, they rue.
Booking profits is similar to playing the market with the mindset of a seeker of assurances and promises. A fixed-income mindset, if you will. There are many errors of judgement that will run along with this need to book profits. The investor somehow believes he can measure the potential of a stock. An equity story is not over until it shows signs of weakness. Money is made by staying with the winners, not by quitting midway because one is feeling uncomfortable.
Why and when is profit booking needed? To get clarity about profit booking, one must see
