I think that the biggest misnomer that surrounds our market is "free shares". As I wrote else where on the forum it makes an investor do two contradictory things hold (bullish) and sell (bearish). Many times partial profit booking is done to reduce the portfolio concentration if a stock has run up a bit. But this is hardly the reason why most of the non institutional investors do a a partial profit booking.

I would rather sell out my entire stake if something is wrong with the company rather then keep a bit of my original quantity thinking them to be free.

If you try and analyze why we do that partial profit booking you would get just one answer. Most of us get nervous when one stock runs up like crazy and then to protect what we have made we try in and lock in the gains by a partial profit booking.

Suppose an investor has bought a stock for Rs 50 and it runs to Rs 100 he books partial profit and keeps the balance shares for free. Invariably he would lose the major chunk of his original holding. While after a decade he could be happy with the kind of wealth the balance has created what he is missing out on is how much wealth could have been created had he stuck on with the whole thing.

Finally the concept of “booking profits and keeping the free shares” is a farce. You cannot book profits and keep the balance shares for free. This is because the profit that you have made has been utilized to bring down the cost of the shares (free shares) that you actually hold. I find it really confusing.

Some big names in India also say about booking a certain percentage of profits and then keeping the rest. I think all this originates from lack of conviction rather then investing strategies as such.