Booking Profit From Funds: Now or When?

Booking profits requires just a click, yet, accumulating a sound investment corpus takes time. Therefore, rushing into booking profits without reconsidering the decision might harm the patiently amassed corpus. The report suggests the right way of going about it

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If you are a long-term investor who has commenced the investment journey early, chances are that you have experienced both market upswings and downturns. You would have persevered during tough times, potentially doubling your investment when valuations were favourable during market downturns. Perhaps now, you might be sensing that the market could undergo a significant downturn, considering it’s currently trading at all-time highs. Such a fall may potentially erode the profits on your investments.

However, it’s essential to note that the Indian markets are trading at higher levels owing to the strength of the Indian economy as compared to the other countries and its own historical values. While it’s certainly plausible that the market could experience volatility over the next few months due to the upcoming Union Budget next month and the general elections, it doesn’t necessarily imply that the market will take a U-turn from this point and see a significant downturn.

As such, many of you may be wondering if it is the right time to take profit from the table rather than when one should book profits from the funds. Let’s delve into the current dilemma of when to book profits. There should be a strong reason to book profit or exit from your funds. When equity indices touch new highs, it does not necessarily mean that you should exit from the funds and book profit. In fact, had you stopped or booked profits a year ago some time at the end of November and start of December 2023, not only would it have reduced your accumulated investment, but it might also have led to missing out on the compounding effect, which demonstrates its magic over the long term.