After 4 years of following a traditional buy-and-hold approach—investing in fundamentally strong companies and letting time do its work—I’ve recently shifted to a more active investing style. Instead of holding indefinitely, I now book profits when a stock experiences a significant spike and rotate the capital into other companies that are still fundamentally sound but currently undervalued or overlooked. I maintain a core list of about 30 major companies I trust, along with a watchlist of 10 backup stocks that I consider “next in line” based on valuation and momentum.
My reasoning is simple: instead of waiting years for compounding to play out in an already-overvalued stock, why not realize gains and reallocate to a better-valued opportunity?
This way, I’m staying within my comfort zone of quality companies, but making my capital work harder. That said, I’m aware that active strategies can invite more timing risk, transaction costs, and psychological stress.
I’d love to hear from fellow investors: Do you think this approach can outperform in the long run, or is sticking with a classic buy-and-hold strategy ultimately wiser and less error-prone?
My approach is a bit different. I buy-and-hold fundamentally strong companies as long as the company and the management walks the talk. When i say fundamentally strong company means, companies with strong moat, high entry barriers, and a great management.
You will make more returns by rotating style of investment. I am following this strategy for last 6 years. Stock price rise are never linear, if a company is good and upcoming growth is visible, it will not trade at cheaper valuation due to early insider information availability. My typical holding period is 2-3 years, rotation of capital will depend on stock valuation, if stick has become euphoric and damn expensive, i shunt all capital else 40-50% is taken out. This create a rebalance. Always looking for hated stocks which have gone through local issues like aquisition, temporary cyclic downturn, position sizing is large enough so that when rebound happens you create a large alpha else losses will be lower as stock is already hated and trade below intrinsic valuations. Though you will look like an idiot when momentum stocks are roaring and your portfolio is looking like nuts.. This is called bottom up value investing.
If you rotate in momentum stocks, results will be inferior and risk will be higher. Its all game of conviction, holding patiently and watching the paint getting dry.
Personally for me, rotating capital increased my IRR but if you notice any successful investor who had made any significant wealth, you will notice that it will be his top pick - which contributes most of gains. I believe this also depend on invested capital like 1 cr vs 100 crs - your game changes. Thanks!
In one of his annual letters, Warren Buffett proved by his own company’s example that by keeping long term, not only did they achieve higher profits, but also they gave higher amount as income tax. The difference was huge on both fronts. Plus the avoid the stress of buying and selling multiple times.
Warren buffet is investing for last 75 years, major gains for warren buffet started after he crossed age of 60. Warren lost in paytm, warren is still holding coca cola, cocacola has given muted returns after 1975, it was better to churn the capital to buy undervalued business, what is point holding cocacola now, just for dividends. He has to do it as portfolio base is very large. This is journey of progression as you start building your portfolio. Higher churn is recommended when portfolio size is below 1 cr, once you move above 1 cr, you will look for stability in 20-40% of PF. As you move up the ladder, above 10 cr, risky bets reduces to 10-15%.
I may not be eligible to mention anything here and am a very conservative investor when it comes to chosing companies to invest in and buy or sell..
I do feel churning, if done right, could have provided enhanced returns but as a word of caution purely based on my personal experience and style - Churning must happen not with an intent to maximise returns but with an intent to maximise the quality of your portfolio and refinement of your strategy. If its for the prior, rewards maybe higher but so would be risks and charted path would be uncertain, unless thats your core strategy.
That is a byproduct. Well, if you are paying more tax, you are helping in building the nation. Which option is better? Higher absolute gains for self with higher taxes OR lower gains with lower taxes?
Well, no one can time the market, it’s futile. You feel a scrip has moved too much and you sell it thinking you will buy it at lower levels or buy another company present at good valuation, but instead the earlier company moves even higher and the other don’t.
@Investor_No_1 Definitely. I have always churned my portfolio to re-invest the profits in great companies for the long term. Although I’m also open to switching between companies when valuations become super expensive.
@Ravi_Hundal Higher profits with lower taxes would be my preferred choice
I’m not trying to time the markets. In the last 4 years, I have experienced cycles where a great stock too becomes bearish and that’s where I exit and wait for the pattern to turn bullish to enter again. I may not be able to time that perfectly, but I can definitely put my money to better use if I invest that into a share that’s in an uptrend. My shares on the bench come into play at that time!
I believe the “buy and hold for 10–20 years” approach should be limited to stocks of companies that operate on the supply side and possess a durable competitive advantage over their peers. However, identifying such companies has become significantly more difficult compared to the 1980s and 1990s, when market dynamics were far more stable and less prone to rapid change.
After experiencing the mild bear market of 2024, I shifted my approach from long-term holding to actively managing my portfolio, reallocating whenever I find better opportunities. In hindsight, several indicators suggested I should have sold at the September highs, but I hesitated—thinking, “If I’m holding for 10 years, why sell just because of a 30–40% drop?” Had I acted on those signals, sold near the peak, and reinvested at lower levels—or even rotated into stronger opportunities—my portfolio’s XIRR would likely have been significantly higher.
Even Warren Buffett has mentioned that if he were running a partnership today—like he did in the 1960s—he would have sold Coca-Cola as soon as it reached his estimate of intrinsic value.
I believe that if a ₹300 stock rises to ₹1,000 in just 1–2 years without any meaningful improvement in underlying profits, it’s wiser to sell and reallocate to other fundamentally strong opportunities. It’s not about timing the market—it’s about staying rational. Easier said than done, of course.
@madhavojha Not selling in September is the same regret I have, and that became the catalyst for my new strategy of rotating the profits and actively managing my portfolio.
I believe rotating capital works better for stocks which have run up a lot in a lesser duration.(you can use swing trading strategies for the same) It also depends on the capital that you are investing in a particular stock. More or less it all depends how sound are your phycological skills that keeps in you invested even if the stock rises more than 10X or 20X or more. Most of us book it all within a short upward move.
