uma shashikantinvestors are eager to know how and when to book profits they have heard that they should periodically sell what they have bought to earn a good return on their investment they have also had the misfortune of seeing their investments soar in value and then fall they rue their failure to foresee the turn in prices and sell at the right time these experiences make them believe that timing the market is a skill they need and selling periodically is a good thing to do there is a more nuanced way of looking at thisselling can be attributed to two motivations the first is to liquidate in order to meet a specific requirement this is needbased selling which is done without bothering too much about the timing some planners advise investors to indulge only in this kind of selling it is simple needs no specific skill and the investors may simply get lucky if they happen to sell at the right time the second is viewbased selling where investors like to keep the money invested but may want to move it from one investment to another such selling can take place in three different situationsfirst investors may rebalance their portfolios to achieve what they are comfortable with for example if they do not want more than 60 of their investment in equity they may sell when this proportion is exceeded and bring the portfolio back in line second they may want to tactically modify the composition of their investment for example when they sell shares and keep the money in a bank deposit they reduce their holding in equity and increase it in debt third they may alter the choice of investment selling something that is not working for them for example they may sell banking stocks and reinvest in technology stocks to implement a view on the relative performance of the two sectors the skills required for each of these viewbased decisions is progressively higherthe simplest to implement is the mechanical rebalancing of a portfolio around predetermined allocations investors can review their holdings periodically say once a quarter to see how the proportions are distributed across equity debt real estate gold and cash they can move money according to a defined proportion across these assets this should work well provided they take a holistic view of their wealth and manage it as one large pool many may not even know or be willing to take the time to determine these proportions rebalancing is the simplest way to deal with the dilemma of profit booking but tough to implement due to behavioural limitationsfor instance the proportion of equity in a portfolio will shoot up when the markets do well rebalancing will mean pulling money out of equity that is yielding high return and putting it in debt that yields low return the temptation to let the profits run will be very high to those who can make it happen periodic rebalancing is a good technique to book profits