TRADING DILEMMAS

It is not easy buying and selling stocks or commodities when the prices are highly volatile. 

It is not easy buying or selling  something when the prices have gone up substantially, or gone down substantially. 

When gold was at 50,000 for ten grams, I used to get this question a lot.

" It has already gone up, should I buy now? Or wait?" 

Wait for what? 

A pullback! 

Well, the pullback never happened and gold is at 168000 per ten grams now. 

The same question now repeats. 

Silver is another example. It was at one lakh rupees per kg one year back, and now it is at 373,000 per kg. 

" OMG! Can I buy now?! It's gone up so much! "

There are people who will always feel that the prices are too high, and they will wait for a pullback to buy. Pullback from where? What if it goes up to 420000 from here and drops to 390000? Will you buy? 

I will blame the so called equity analysts and experts for this. "Buy on dips" they will tell you. I have never understood what "buy on dips" means. 

What if I told you I expect silver to go to 6 lakhs by end of this year? Will you buy? 

Worse than the buying decision is the selling decision. I bought silver in September when it was 150000 per kg. What should I do now? Sell? Sell half so that I recover my principal? Sell one third? Sell and invest the proceeds where? 

Silver has been known to correct up to fifty percent in past bull runs. That is stomach churning volatility! 

What if silver happens to be fifty percent of my total investment portfolio? What if it happens to be just 5 percent? Will the answer be different in either case? 

"Book part profits and de-risk. Diversify" say all the investment gurus. That is good advice. 

"Diversification is reversion to the mean. It shows that you have no conviction. If you want to make money, real money, you have to bet your shirt on your maximum conviction trade" say some investment greats. This is also good advice. 

"Depends on what you want in life. If you have reached for target profit, exit" say some people. But the target is a constantly moving thing, it vacillates along with greed and fear! 

"You have already made enough, why do you want more" say others. Very philosophical, and I have said the same to other people in several different contexts. But when it comes to myself, "enough" is a philosophy that is difficult to put into practice. 

There is no one answer to the above questions. It is an ever changing trade-off between risk and stability, greed and fear, philosophy and practicality, risk tolerance versus risk aversion, coupled with my own  comfort in dealing with money, my upbringing, my conviction and my aspirations. 

And then there is luck. Never underestimate luck, or the divine hand of providence! 

I invested in silver four months back when it was 150000 per kg in September. My investment, then and more so now, is a substantial portion of my investment basket. Silver is now at 370000 per kg. 

What would you do if you were in my position? 

Would love to know your thoughts.