Monday, January 21, 2013

Portfolio Management

When you start investing in stocks, you will soon have a portfolio of them. And managing your portfolio is just as important as picking the right stocks in the first place. Because if you mismanage your portfolio you could be minimizing your potential returns or end up losing money! 

So always take note of your stock portfolio and here are some guidelines to help you along:
  1. This one is straightforward but some beginners neglect to do this - Keep records of all your investment decisions. If you don't keep track, you won't know how much you're making or losing!
  2. A portfolio of 5-8 stocks is optimum for the typical investor . Keep within a certain number so your portfolio remains manageable. Too many stocks could result in a lack of proper management and cause losses in your portfolio
  3. Monitor a company's' quarterly reports and keep track of their fundamental performance
  4. On top of monitoring your stock through financial reports, you should attend the Annual General Meetings (AGMs) to meet a company's management team face-to-face
  5. Stay current with world and economic affairs and monitor any news on your stocks and the industry they're in
In a nutshell, managing your portfolio can be summed up in one simple sentence: sell your losers, keep your winners. Sell bad, under-performing investments and cut your losses. Stay invested in good companies and hold on to them, especially if they have good growth potential. 
Because let me ask you...
Would you be happy with a 22% dividend yield year after year? That means for every $100 you invested, you're getting $22 back in passive income every year. You don't even have to do anything to make that money; you just sit and wait!
Well, that's what value investing can do for you when you hold on to a winner long enough.

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