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Showing posts with label Stock Portfolio Management. Show all posts
Showing posts with label Stock Portfolio Management. Show all posts

Monday, September 12, 2011

How to Manage your Equity Portfolio?

Investor with a long-term horizon should not be worried by volatile market movements and hold on to their positions. The current market correction has given a good opportunity for investors looking at building an equity portfolio.

Below are some significant aspects of building and managing an equity portfolio in these conditions:

Risk & Returns

It is very important to set realistic expectations from your equity investments. An investor's expectations of unrealistically high returns from the stock markets force him/her to take some irrational decisions where he/she will end up losing his/her hard-earned money.

It is important for you to understand your risk profile which depends on many individual factors like age, financial background, earning visibility and stability and family background. This also helps in taking decisions on picking the right set of stocks.

Equity investments should be a part of the total investment portfolio. You should also look at other instruments such as life insurance cover, medical insurance cover, investments in tax-saving instruments etc, apart from maintaining sufficient liquidity.

Picking Stocks

In the equity markets, stocks are categorised into sectors based on their business focus and industry. It is advisable to identify sectors whose outlook is good in the current market conditions. Look at diversification in terms of identifying more than one sector, and within a sector, selecting more than one stock to invest in.

An ideal equity portfolio will have 10-12 carefully selected stocks.

Do evaluate your equity portfolio on regular time intervals, this will help you to know whether stocks in your portfolio are meeting your expectations as compared to peers in the same sector in terms of QonQ as well as YonY growth, expansion plans, dividend payouts etc.

Stock Analysis

An analysis is very important before investing in any stock. This includes past performance of the stock with respect to market indices, outlook of the sector , management guidelines for the future on business/earnings visibility etc. An analysis is recommended even more for investors who are new in the markets and mostly rely on tips.

Analysis and questioning helps in increasing your understanding of stocks, and taking the right decisions based on your investment objectives and risk profile.

Stock Tips & Recommendations

Many investors rely on tips from analysts, stock brokers, and the media. Try to understand the basis of these recommendations rather than just following the advice. Discuss with other investors to identify stocks to invest in. This also helps in building knowledge about the market as well as stocks.

Due to the dynamic nature of the stock markets, it is very difficult for an individual to track and react to significant developments. Investors can share their views with others in the same community, various financial websites with discussion forums is a good platform to learn through interaction and be attentive to many significant market developments.

Our Services: Hidden Gems | Value Picks | 15% @ 90 DAYS | WEALTH-BUILDER

Posted by Saral Gyan at 8:00:00 AM
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Friday, November 5, 2010

Saral Gyan Rs 1 Lakh "Muhurat" Portfolio

This year we have selected 10 scrips as “Muhurat Picks” that we believe should do well on the bourses in the next one year.

Our selection process, has been made with lot of research and data analysis. We first identified the sectors that are likely to do well in the next 12 months. Having that done, we further refined our search to select companies from that sector. We have created a portfolio worth Rs. 1 Lakh comprising below 10 scrips so that it can help investors to create a model portfolio with lump sum investment upto 1 Lakh with time horizon of one year.

We have given the different allocation to each of the scrips keeping in mind the risk versus returns ratio. We have also fine tuned the portfolio with large-cap, mid-cap and small cap scrips so that the investors can invest in a complete mix of stocks to balance their portfolio.

Note: Saral Gyan "Muhurat" Portfolio can't be published in our website subject to interest of our paid subscribers.

Saral Gyan Rs 1 Lakh "Muhurat" Portfolio has already been mailed to all our paid subscribers. The performance of the same will be reviewed by next year.

We also take this opportunity to wish you all a very happy & safe Diwali.

May Goddess Lakshmi shower her blessings for prosperity, health and success.


We thank you for your association with Saral Gyan Capital Services, looking forward to long lasting relationship.

Regards,

Saral Gyan Team,
Saral Gyan Capital Services

Our Services: Hidden Gems | Value Picks | 15% @ 90 DAYS | WEALTH-BUILDER

Posted by Saral Gyan at 7:00:00 AM
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Sunday, October 17, 2010

How to Rebalance Your Stock Portfolio?

Portfolio rebalancing is the process of bringing the different asset classes back into proper relationship following a significant change in one or more.

More simply stated, it is returning your portfolio to the proper mix of stocks, bonds and cash when they no longer conform to your plan. An example might help.
Say you have determined that given your risk tolerance, time horizon and financial goals that your portfolio should look like this:

• Stocks 60% Rs. 60,000
• Bonds 35% Rs. 35,000
• Cash 5% Rs. 5,000
• Total 100% Rs. 100,000

We’ll use a starting total portfolio value of Rs. 100,000 so the math is easy and the rupees and percentages match.

A couple of your stocks catch on fire and before you know it, your portfolio looks like this:

• Stocks 66% Rs. 80,000
• Bonds 29% Rs. 35,000
• Cash 4% Rs. 5,000
• Total 100% Rs. 120,000

You might be thinking, ‘What’s the problem? You are up Rs. 20,000 – isn’t that a good thing?’

Of course, it’s a good thing, however the problem is it has moved the investor away from the ideal asset allocation and possibly exposed him or her to more risk than is acceptable.

This is where the conservative investor will step in and bring the portfolio back to the original allocation.

How to Change:
You can do this several ways. First, you could sell off some of the stock that had the recent run up and invest the profits in bonds and cash until the original percentages are achieved.

Another alternative would be to look at your other stock holdings and sell any underperformers to generate the cash to invest in the other two asset classes.

The third alternative would be to invest new money into your portfolio in the bonds and cash portion to bring those percentages up to proper levels.

It would be tempting to leave the portfolio alone, however the purpose of establishing an allocation is to achieve the best return with an acceptable level of risk. Doing nothing violates that premise and exposes the investor to unacceptable levels of risk.

As a rule of thumb, when your assets drift 5% or more away from your allocation, you should re-balance. This can occur naturally over time or following an abrupt rise or decline in one or more asset classes.

Look at Your Stocks:
Re-balancing is not just a big picture exercise. Within the stocks portion of your portfolio, you may need to rebalance those relationship also.

For example, you might determine the stock portion of your portfolio should look like this:

• Large-cap growth stocks 50%
• Utility stocks 30%
• Technology stocks 10%
• Other stocks 10%

If several technology stocks takeoff in a big way, you face a dilemma. Do you sell off some of your winners and buy more of the other categories to rebalance your portfolio?

The other alternative is to put more money into the other stock categories to bring their percentages up and the portfolio back into balance.

The Price of Inaction:
What is the price of doing nothing? If you are risk adverse, a portfolio that becomes more heavily weighted in volatile technology stocks will keep you up at night.

Consider what happened to many investors during the tech stock boom of the late 1990s. Not only did they let the technology stocks grow out of any reasonable allocation, many also sold off other stock to buy more technology companies.

When the market crashed in March of 2000, the investors who had let technology balloon to a hugely disproportionate percentage of their portfolio had nothing to fall back on.

Portfolio rebalancing is an important part of sticking to your game plan. You should look at your portfolio at least quarterly in terms of rebalancing and more frequently if you have had a significant gain or loss in any asset class.

Our Services: Hidden Gems | Value Picks | 15% @ 90 DAYS | WEALTH-BUILDER

Posted by Saral Gyan at 11:00:00 AM
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Saturday, September 4, 2010

Profitable Stock Investments

To build a stock portfolio we start by looking for well-managed companies with good earnings growth that are selling at reasonable valuations.

To find them, we use fundamental factors, which include valuation, momentum and other techniques used in equities research.

We identify the investment objectives, fine-tune the processes to meet that objectives, identify the sources of returns, construct the portfolios, monitor and adjust them as necessary.

Increasing the Odds of Success

Nothing guarantees success when investing in the stock markets, but there are tools and resources that can increase the probability of superior investment performance, and we do try to employ them all.

We promote ideas and in-depth research from around the world. To make sure we have access to every aspect of every company, we have also formed extensive alliances with international experts to provide market analysis and perspective.

Risk management is a science and when it comes to it, we believe that ongoing analysis and quality control are the keys to improved performance and to protecting our clients from unnecessary risks.

We set parameters and monitor risk across all strategies, review sector weightings and individual stocks on a daily basis, track where we are relative to specific benchmarks and our competition, and adjust our holdings as appropriate to the ever-changing world market environment.

Our global network is the foundation of our research effort, while the scope of our operations provides us with superior management access and trade execution virtually anywhere in the world.

Furthermore, we work with top investment managers and we support them with exceptional technology and information resources that lead to the most profitable and productive actions.

What about the "Long-Term?"

While reinforcing the need for patience, the markets performance during the past years has put many investors who claim to be long-term investors to the real acid test.

Our portfolios are designed to meet long-term objectives, and long-term does not mean the next month or the next year. They could very easily mean five years down the line when i.e. your first child goes to college or 30 years from now when it is time for your retirement.

Portfolios are put together to weather and even benefit from market cycles, not to be torpedoed in the middle of them.

That is why investors must always ask themselves why they want to invest in equities and what they really mean by "long term"

In our opinion, if the investors don't have their targets clearly focused they should not be in the markets at all. They would be better off putting their money into bonds and money market funds, or better yet under their pillows.

And if they are in for the long-term, investors should do everything they can to ignore the pains of a down market. The time will come when the fall will be just a tiny footnote rather than a major front-page headline.

Everlasting Opportunities?

During the past years we have witnessed a brutal and confusing period for the stock market, with twists and turns that kept ignoring all historical trends.

Normally, one might take heart at the fact that, since the declines such as the 2001 - 2003, 2007-2009 that we have lately seen have come near the end of bear markets and been followed by rapid advances.

But again, we seem to be in a period where historical patterns - for the short term at least - are not a certain guide anymore.

Basic rules and common sense were forgotten in the "gold rush" of the late 90s, but have been painfully reinforced and reactivated by the 2001 - 2003 & 2007 - 2009 stock market's declining performance.

There is always risk involved in equity investment. The last bull market, when every stock from i.e. Internet start-ups to blue chip companies steadily kept on rising, was an anomaly, and it is not due for a fast return. The sooner we accept that the better will be for everybody.

And as difficult as it may be to believe it, during this severe bear market, there are always certain excellent buying opportunities to be found.

In fact we do believe that sometime during the next years we will look back to this point in time and see it as having been the ideal one for buying stocks.

The right stocks, that is...

Beating the market takes a little luck, a huge effort and constant hard work; and as we have shown, that we are well equipped to the challenges of capitalizing on opportunities.

Our Services: Hidden Gems | Value Picks | 15% @ 90 DAYS | WEALTH-BUILDER

Posted by Saral Gyan at 9:30:00 AM
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Thursday, September 2, 2010

How to Manage a Stock Portfolio?

Retails investors often trade in stocks without understanding the deeper implications of their buy or sell decisions. When you invest in stocks, you implicitly are building a stock portfolio.

Here is a set of actionable steps that you must keep in mind to help you with building your stock portfolio.

1. Diversify:

Just buying stocks in 1 or 2 companies is not enough. You could be taking on too much risk through a concentrated portfolio, akin to  putting all your eggs in one basket. Ideally, your portfolio should have no more than 20-25 names to give you the benefits of diversification.

However, this also does not mean that you can have just say 5 shares of one company and 2 shares of another, because that is all you can afford because you can’t create wealth through just purchasing a handful of shares in a company.

Good stockpicking is about knowing how to allocate your capital efficiently across your best ideas in a diverse portfolio.

2. Review Your Exposure Frequently:

While one investment strategy is to buy and hold, that does not imply that you do not manage your exposure by ignoring your portfolio. Market prices move, sometimes dramatically.

As a result, you might have too much or too little exposure to one sector or stock. Avoid this by being disciplined about setting aside some time to review your exposure. This will help you understand if you need to trim or add to the exposure to a certain sector or stock in your portfolio and take care of risk management.

3. Create your own set of rules to guide you:

Formulate your own rules for when to buy or sell a stock based on an investment philosophy that you can be disciplined about. Don’t just follow the herd or come under peer pressure.

What is good for others might not be suitable for you or your portfolio because your risk, investment criteria, tax situation and entry price might be different. If a stock has met your price target, have some rules that guide you whether you will take money off the table or stay invested.

If a stock is a constant underperformer, will you continue holding on to it because psychologically you are unwilling to admit that you made a poor decision, or will you be unemotional and make the rational decision to cut your losses and sell?

4. Keep some cash available:

This is one area where the professional investors stand out. They recognize that good investment opportunities come unannounced, but in order to take advantage of them they need to have cash available to make these investments.

So make sure that you keep some cash available in your portfolio to pounce on these ideas. If you are fully invested, you might miss good opportunities due to lack of liquidity.

If the above sounds challenging and tough for you to follow, then a do-it-yourself portfolio management is not recommended. As an alternative you might be better invest in the stock markets based on equity advisor services with stock specific research and recommendations or you can invest through mutual funds, where you can take advantage of the resources and risk management skills of the professionals, rather than compete against them.

Our Services: Hidden Gems | Value Picks | 15% @ 90 DAYS | WEALTH-BUILDER

Posted by Saral Gyan at 1:05:00 PM
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