Stocks having this risk are over-priced. One must not buy more of it; rather see it as an opportunity to book some profit.
CMP: 900 | ₹29 K (2.7% of Portfolio)
CMP: 195 | ₹16 K (1.5% of Portfolio)
CMP: 637 | ₹11 K (1.1% of Portfolio)
CMP: 1352 | ₹7 K (0.6% of Portfolio)
CMP: 523 | ₹2 K (0.2% of Portfolio)
When an asset is overpriced as compared to its fair value, your portfolio is exposed to valuation risk. Valuation risk impacts return on investment, as the more overvalued the asset is, the lower the probability of return for the investor.
Over valuation is usually a temporary phenomenon. Sooner or later, due to self correcting mechanism, the price of such stocks will fall, either gradually or often with a dramatic crash. If you have overpriced stocks forming a large portion of your portfolio, as the price reduces your portfolio value will decrease, even if the correction is only to its fair value.
Don't believe the myth that you can time the market, sell at the highest price or get out at the peak. If you have access to fair value of the company, compare the CMP. This will help you gauge where the stock stands from a valuation perspective. It is safer to sell overvalued stock and book profits, at least partially. And invest in fundamentally strong companies at attractive prices to continue to earn good returns and avoid valuation risk.