Why Exit Strategy Matters as Much as Entry in Investing
Ever wondered why your best investments disappear first?
You didn’t sell the wrong asset.
You sold the wrong units.
Most investors unknowingly let their lowest-cost, highest-quality capital exit first, regret it years later.
A shift in EXIT sequencing can enable.
- Profits without destroying your best capital.
- Low cost units invested for compounding.
- Selling high cost units for tactical exits.
Selling stocks, ETFs or mutual funds in India, follow FIFO.
First In. First Out.
Your broker shows an average buy price.
But exits don’t follow averages.
It happens at unit level based on when you bought them.
A real example (Silver ETF)
Assume an investor accumulated Nippon India Silver ETF over time:
Mar 2022: ₹1 lakh at ₹65 → 1,538 units
Jul 2025: ₹1 lakh at ₹130 → 769 units
Dec 2025: ₹1 lakh at ₹165 → 606 units
Total investment: ₹3 lakh
Total units = 2,913
Dashboard average price: ~₹120
Today, silver trades at ₹245.
The investor decides to sell ₹1 lakh worth.
Sounds simple?
What actually gets sold
Because of FIFO:
➡️ Units bought at ₹65 exit first
➡️ Not the recent ₹130 or ₹165 units
➡️ Result: the best compounding capital leaves the portfolio first
This is where investors quietly let go best opportunity of a lifetime.
Not because the asset failed.
But because sequencing failed.
A smarter way to sequence exits
This isn’t a loophole.
This is execution discipline.
Separate low cost legacy units from high cost recent units before selling.
How it works?
Maintain two demat accounts under the same PAN
(preferably under the same depository)
Transfer units off-market from Demat A → Demat B
Transfers also follow FIFO
Older, lower-cost units move out first
Now sell from the account holding higher-cost units
Result.
High-price units used for fortuitous gains / tactical exits
Low-cost units preserved for long-term compounding
Your strongest capital stays invested the longest
Best part, holding period and cost remain unchanged
only small DP charges apply for transfers
Why this matters
Most investors obsess over
❌ Entry price
❌ NAV
❌ Buying the dip
Very few plan:
✅ Which units should exit first
✅ Which units deserve to compound the longest
✅ How execution shapes long-term wealth
Originally published on LinkedIn
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