{"id":242,"date":"2020-02-17T11:18:26","date_gmt":"2020-02-17T11:18:26","guid":{"rendered":"https:\/\/www.invest19.com\/blog\/?p=242"},"modified":"2020-02-17T11:18:28","modified_gmt":"2020-02-17T11:18:28","slug":"importance-of-profit-booking-in-the-share-market","status":"publish","type":"post","link":"https:\/\/www.invest19.com\/blog\/importance-of-profit-booking-in-the-share-market\/","title":{"rendered":"Importance of Profit Booking in the Share Market"},"content":{"rendered":"
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We all have been intrigued by the philosophy of stock\ninvesting. As human beings, we are engrained to yearn for investment and see\nour wealth grow substantially.  But\nmaking it big in terms of investment is a two-fold story. For every investment\ninto the market, you also need to book your profits if you want to realize the\ngains. <\/p>\n\n\n\n

The concept of profit booking although a common term is\nstill unknown to many.  We here look at\nwhat profit booking means and will further seek the importance of profit\nbooking down below. <\/p>\n\n\n\n

What is Profit Booking?<\/h2>\n\n\n\n

Profit booking is a concept which means liquidating your\ninvestment into cash. It refers to the situation where you cash out your\ninvestment and book the profits. The concept of stock investment is pretty simple;\nyou invest your money into the stocks with a goal to seek wealth creation in\nthe long run. The stock rises in values which will increase your wealth\nsubstantially. But that increase in value is nominal in nature until and unless\nyou realize it in the form of profit booking and turn it into real form. This\nstep of changing the nominal wealth into real wealth can be interpreted as\nprofit booking. <\/p>\n\n\n\n

Importance of Profit\nBooking<\/h2>\n\n\n\n

There\nare plenty of benefits of profit booking in the share market. We here will list\nthem down below and brief you on it. <\/p>\n\n\n\n

  1. Liquidity<\/strong>: A major reason to book profits\nis to ascertain the liquidity in times of the volatile market. The stock market\nis pretty dynamic and ever-changing and is at its most volatile stage in\ncomparison to the earlier times. Even the global scenes affect the market\npretty much. So booking profits when the market is favourable will allow you to\nmaximize your gains. It allows you to liquidate your investment and use it in\ntimes of need. It\u2019s not that to say you cannot reenter into the share again as\nyou can reinvest later on and again start your part of booking profits. <\/li>
  2. Control on emotional bias<\/strong>: We often tend to be emotional\ntowards investment. When we invest in the stocks we make an emotional bonding\ntowards it to such hilt that we don\u2019t want to sell it off. We hold the stocks\nand see the appreciation growing on for it. Rather than selling and booking the\nprofit, we tend to hold on waiting for the price to further increase on. But\none thing we forget is that the entry and exit into the share market are pretty\neasy unlike in the cases of real estate and other investment. We can understand\nthe bond in such fixed assets but when it comes to the sharing market, you have\nample opportunity to book the profits whenever you get the opportunity. <\/li>
  3. Rebalancing of portfolio<\/strong>: When we start our investment\njourney we tend to have an investment goal in mind and based on that we set an\ninvestment ratio. For say, you have opted for an 80 per cent equity and 20 per cent\nmutual fund. With time, the market dynamics will change and with that your\nasset allocation ratio will change. So it is advised to make timely changes\ninto your portfolio so as to bring it in line to the initial goal. This is\nwhere profit booking will help you around. With profit booking, you can sell\noff part of your asset and rebalance the ratio on offer. <\/li><\/ol>\n\n\n\n

    The\nconcept of profit booking is a great thing as it allows you to gain an upper\nhand in the times of volatile market and even gain access to liquid cash at the\nearliest something that won\u2019t be possible with other types of investment.\nProfit booking is a strategy that a stock trader or an investor should utilize\nmuch often. Booking profits also help you to transform that nominal wealth into\nreal wealth. <\/p>\n

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    \n \n <\/i>\n <\/a>\n 4 <\/span>\n<\/div><\/div>\n\n","protected":false},"excerpt":{"rendered":"

    We all have been intrigued by the philosophy of stock investing. As human beings, we are engrained to yearn for investment and see our wealth […] Read More<\/a><\/span><\/p>\n","protected":false},"author":1,"featured_media":243,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[43],"class_list":["post-242","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-stock-market","tag-profit-booking"],"_links":{"self":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts\/242","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/comments?post=242"}],"version-history":[{"count":1,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts\/242\/revisions"}],"predecessor-version":[{"id":244,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts\/242\/revisions\/244"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/media\/243"}],"wp:attachment":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/media?parent=242"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/categories?post=242"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/tags?post=242"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}