If there is one question that is frequently asked by investors, it is this: Should I sell my mutual fund units and shares and make a profit or should I hold on?

On the one hand, you hear statements claiming that this bull run is going to last for at least a few years. On the other, you are warned to be careful because it has peaked.

So, what does one do?

The advice dished out on investing sounds great in theory. Buy low (when the prices of shares or mutual fund units hit rock bottom) and sell high (when they soar) is a surefire way to make money in the market.

But frankly, who has a clue as to when the stock market has touched rock bottom or has peaked?

The dilemma of when to buy and sell lies in the uncertainty as to whether the stock market will fall or not, and if yes, when? No one can have such foresight.

Even if someone confidently looks you in the eye and swears that the Sensex is going to soar to even greater heights, there is no way you can know that for a fact.

• Time to start tax planning

Offload slowly

Don't begin by selling all your units. Sell portions of it.

Say you have 100 units of a fund. And if you sell now you are sure to make a profit. But, you want to wait for a few more months because you want to make an even better profit if the Sensex creeps upwards.

Sell 50 units now. In this way you hedge your bets. If the Sensex does fall and the value of units falls, you would have made a neat profit by selling a part of your holdings.

If the Sensex does rise, you can sell the other units at a higher level.

I have a friend who decides when to sell at the time of buying his units or shares. He does not look at the Sensex, but at his returns.

Let's say he buys 100 units of a mutual fund or the shares of a company. He then breaks them up into lots of 25 each.

When he makes a 20% profit on the investment, he sells the first lot.

The next lot of 25 is sold at a 25% appreciation.

As he keeps making a profit, he raises the stakes. The third set is sold at a 40% appreciation and the last lot at 50%.

In this way, if the price goes up after he sells his first lot, he still has shares to sell at a better profit.

If the price drops after he sells his first lot, at least he made a profit on a portion of his investment.

Of course, these are high parameters to have right now with the Sensex at 9000 levels. But you can apply the underlying principle to your strategy.

Maybe you can sell 50% of your investment now, 30% when the Sensex appreciates some more and 20% when you believe it has peaked.

• What falls under Section 80C?

What about buying now?

What if you sell your units or shares and don't know where to invest the profits?

If you are considering a mutual fund, check the performance of the fund over time. Are you happy with the way a particular fund manager manages his fund and the objective of the fund? If yes, consider investing in it.

The best way to buy mutual funds units at this point is to opt for a Systematic Investment Plan.

Decide how much of money you want to allocate every month and invest that in the mutual fund of your choice.

Depending on the Net Asset Value, you will get units assigned to you.

In this way, you end up buying units when the NAV is high and low. Over time, it evens out.

If you don't want to invest in a diversified equity fund, you can try a balanced fund which invests in shares and fixed return instruments.

When buying shares, look at it from a really long-term point of view.

Invest in stocks you truly believe in. Look at the fundamentals. Analyse the company and ask yourself if you want to be part of it.

If the market does crash, will you still be comfortable holding these shares? If yes, then buy.

• Santa, let the Sensex touch 15000

Stay emotionless

This one is tough. Where money is concerned, it is difficult not to get greedy.

When that happens, no price is good enough. You will just keep waiting for price to go higher.

The reverse also works. Once you sell, don't look back in regret if the price keeps zooming. Be happy with your profit.