Planning savings from liquid and fixed assets – Jumping the S Curve with acquisitions and dis-investments

If assets appreciate fast, book profits before others do

There are a few thumb rules of when to offload profit making stocks. If you follow them you can make money consistently. People waiting for profit maximization usually lose money because of stock price volatility. So, like the big boys of the share market you too must know when to start booking profits. If you are smart you will book profits before the market does. For that it Is important to watch market trends.

There is no hard and fast rule of when to book profits, but usually it is good to liquidate stocks if they have appreciated 20% to 25% within a quarter. It is however best to watch out for the market news before taking a decision. Ask yourself the questions. Why is the stock appreciating? Is it due to a bonus or a rights issue or news of expansion or high profit expectations? It is worth reading up business news to find more about the stocks you are investing in instead of just going blindly by your friend’s or stock brokers advice.

Just like switching investments in stocks you need to switch investments while creating fixed assets. There are several investments you need to do to add stability to your working life. One of them is planning a home. The conventional way to do asset acquisition is to plan a large home early in life and start paying for the mortgages early, so that you are free of loans before you reach your retirement age. The yoke of monthly mortgages however kills your risk appetite and this method is not advisable if you are planning to be wealthy.

Applying the S Curve to personal investments

The S curve to measure business performance has long been in use. It is usually used to show the slow initial stages and later day tapering of stages of a business venture. Smart and agile companies are advised to have products that are accelerating fast, performing concurrent to those in the starting or the end phase. This would ensure that you are ahead of the pack and are planning to eliminate the down cycles of your high-performance business. You are doing this by continually putting in new products at the time when some of your best products are performing well.

In the case of personal investments, you apply the concept a little differently. Here you keep switching assets. You continuously invest and disinvest to gain capital appreciation and stay ahead of the S curve. You start early by taking more risks which promise more gains. As you keep on liquidating your portfolio and book profits, you move on towards acquiring safer investments. When you go through the capital appreciation route you save on interest costs. So you pay lesser over a long period of time. You also have the option of switching to better options. This is how you jump the S curve to stay a head.

Switching investments to stay ahead

Personal investment is different from business performance. This because you have just one limited source of income from which you are pushing out a small percentage each month to your investment pool. In the second article of this series ‘How to turn into an early investor? Planning savings for a 20 year old’ – we had suggested that you create a separate account where you auto stash 10% of your monthly take home income. We had also asked you to mix your investments boldly with at least 50% to 80% invested in fast moving stocks. Later as you grow older you need to move away from fast moving stocks and look at blue chip investments, that are pricey but give you consistently high returns. Switching investment strategies help you stay ahead of the S curve. We will let you know how to do so in the case of fixed assets in the coming days.