Stock Portfolio – How to Monitor your Stock Portfolio

Posted by Mehul Kothari | Published on 08 Nov 2019
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Stock Portfolio – How to Monitor your Stock Portfolio

It is said that well begun is half done. But what about the other half? Smart investors like you know that their job does not end with stock selection or building a good portfolio. That is just half of the job done. To ensure wealth creation in the long-run, you need to monitor the stock portfolio on a regular periodic basis. But does that mean that you need to daily check the stock prices? The answer is a loud No.

Read on to know how you can monitor your stock market portfolio in a sane and effective manner.

1. Keep yourself updated

Remember when your parents or teachers would ask you to keep yourself updated with current affairs? Well, that will pay off even while monitoring your stock portfolio. You should read up about the company and also any new developments in the industry. This will ensure that you are abreast with any policy revisions, regulatory changes or any macro-economic factor that might impact the profitability of the sector or stock portfolio.

You do not need to rely only on newspapers. You can leverage technology for this task. Google Alerts make this task easier and more real-time. Especially for small or mid-cap companies which may not enjoy wide coverage by mainstream media. You can set Google Alerts for companies in your stock portfolio and enjoy information at the click of a button. Many financial service providers also provide important news and market highlights on their portals.

2. Check out corporate announcements

Listed companies need to inform the stock exchange about all important events or company decisions that may impact their stock price. This could be any new acquisition, employment or resignation of key/senior personnel, etc. You should keep an eye out for such corporate announcements. This information is easily available on the company’s as well as the stock exchange’s site. Some companies also inform the shareholders about such corporate announcements via emails.

Ensure to go through the details of corporate announcements as they will help you to monitor the stock portfolio. Moreover, it can influence you to buy more or sell from your share portfolio.


3. Go through the company results

Indian companies release their results on a quarterly basis. It is important to study the quarterly performance reports of your share portfolio. However, the important point is not to get overly concerned if the results are poor in a few quarters. Each company goes through ups and downs. The important factor is consistency. So, do not go into panic (and exit) mode if you notice a dip. Try to analyse the reason behind the poor performance and look at the overall economic scenarios before taking any decision. Continuous poor results (especially when the economy is doing fine) is a sign that you should consider removing that investment from the stock portfolio.

Annual reports also contain information about the company’s future growth plans or strategies. This can influence your decision to stick around or bid adieu to their stocks in the long-run.

 
4. Observe changes in the Shareholding Patterns of promoters

Companies declare their shareholding pattern on a quarterly basis. These details are published on the company’s and stock exchange’s website.

Shareholder pattern can be a great indicator of the overall health of the company and its future. While analysing the changes in the company’s shareholding pattern, you need to focus only on the promoter’s shares. Promoters increasing its stake in the company is a positive sign. Promoters have access to the most pertinent and intimate information about the company. Hence, they will go for a higher share in the company only when they feel that the prospects are good. On the other hand, if you notice that there is a consistent reduction in the promoter’s shareholding, take it as a red flag. Try to figure out the reason behind the same. Sometimes, it may so happen that they sell their stake to raise funds for some personal exigency. But such events are not usually recurrent in nature. Hence, do a thorough root-cause analysis. If you feel that the promoters are trying to move out of the business, it is a good enough indicator for you to follow suit.

 
5. Look if promoter’s shares are pledged

When promoters fall short of financial resources to meet the business’s working capital requirement or need to fund another venture, they can pledge their shares for loan money. Their shares act as a security or collateral for the borrowed funds.

Like the shareholding pattern, companies need to disclose the pledge details of the promoter’s shares on a quarterly basis. You should follow this information and look for any alert signs. Generally, an increase in the promoter’s share pledging is seen as a negative indicator. It indicates that the business is under financial stress. If the promoters are not able to repay the loan amount, the lender can sell the shares in the open market. This will adversely impact the market share prices and bring down the value of your stocks portfolio.

 
6. Credit Rating

Whenever a company raises debt, they need to get themselves assessed and rated by any of the accredited credit rating agencies (CRISIL, ICRA, CARE, India Ratings, etc.) These agencies review the company’s financial health at least on an annual basis and publish the information on their website. Along with the rating, they also give a summary document which gives an overview of the strengths and weakness of the concerned company.

You should review these credit rating reports. They are an easy way of tracking the financial well-being of a company. If you notice a rating downgrade, take it as a serious matter and analyse it in detail. It can significantly help you to save or grow your hard-earned money.

 

Now you know what are the “DOs and DONTs” when it comes to monitoring your stock market portfolio. But still, if you feel that you need some support, don’t worry. Help is just around the corner.

Many financial service companies collate all these data points and publish it on their website. This is highly useful for readers as all the relevant information is available in one commonplace. Also, their in-house analysts study the available information and give their expert opinion on the possible trends, etc. 

One such service provider is IndiaNivesh. It is a full-fledged financial solutions organization and offers a range of services in the domain of mutual funds,  equities, derivatives and commodities, insurance, strategic investments, wealth management, etc. IndiaNivesh’s team has a collective experience of 300 years. Their in-depth understanding of the Indian markets, ability to customise solutions and leverage technology gives them a clear edge. So, next time you find yourself wondering – How can I monitor my stocks portfolio? Reach out to the expert team at IndiaNivesh.





Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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Investing in Mutual Funds vs. Direct Equity Investment in India

Posted by Mehul Kothari | Published on 08 Nov 2019

The ultimate goal for each investor is the same – wealth creation! While the destination is the same, there are different routes that you can take to reach it. You can either invest in mutual funds or you can directly buy equity share or stocks from the open market. Each route has its set of pros and cons. In this article, we will analyse these two options and help you figure out which is the better route based on your requirements. Direct Equity Investment Direct Equity Investment is an active approach to investing. In this route, the investor takes the decisions regarding which stocks to invest in, when to buy/exit, etc. While investing in direct equity, brokerage charges are applicable when transacting via an intermediary. Direct equity investments are best done by those who understand the workings of the stock market and have time and capability to monitor and research individual stocks. Mutual Funds This is the passive approach to investing. Mutual Funds pool in money from a large number of investors and invest across multiple stocks/asset categories as per the scheme’s objective. The portfolio is managed by professionals who are equipped with the required knowledge and resources. Direct Equity vs. Mutual Funds – which route should you take? To answer this question, you will need to consider the below factors:1. Market Expertise Stock investments are not lottery tickets where you can invest in anything and then wait for your luck to work its charm. It requires a great degree of knowledge, analytical skills and experience to choose the right stocks for your needs. There are too many dynamics to be considered. If you have a thorough understanding of the markets (and economic factors impacting it), direct equity investments are ideal for you. On the other hand, if you are a novice, mutual funds should be your go-to channel. If you are not comfortable choosing which mutual funds to invest in, you can take the help of financial advisors as well.2. Time for research Studying, tracking and analysing the stock market and related economic factors is a time-intensive activity. If you feel that you can devote adequate time in analysing the markets and monitoring their investments, you should opt for Direct Equity. Else, you can go the mutual fund route. Mutual Funds corpus is managed by professional experts (fund managers) who are skilled and trained in that domain.3. Diversification The USP of mutual funds is diversification. They offer exposure to a wide range of stocks which form part of the portfolio. Even if you invest a small amount (let’s say Rs. 5,000), your money will be spread across multiple stocks. In the case of direct investments, you can purchase only a limited number of varied stocks. To achieve the same diversification level (as offered by Mutual Funds), you would need to have a higher investible corpus. It also depends on your risk appetite. If you are a conservative investor, mutual funds are a better bet as the risk is distributed. 4. Ownership Equity investments have dual benefits – capital appreciation and ownership rights. If you are someone who wants ownership rights of a company, then you should go for direct investing. You will be eligible to attend shareholders meeting, get voting rights, etc. With mutual funds, you will not get these privileges as the shares are held indirectly.5. Control When you invest via the mutual fund route, you have no say or control in the stock selection. That is at the discretion of the fund manager. So, even if you have good reason to believe that a particular stock is going to fall, you will not be able to take any action. However, if you opt for direct stock investments, you are your own fund manager. You get complete control over the buy or sell decisions. You can exit from single stocks, which is not possible with Mutual Funds.6. Taxation Some Mutual Funds (ELSS) qualify for deductions under Section 80C of the Income Tax Act. However, no such benefit is available with direct stock investments.7. Exit Load In direct equity investments, there is no exit load. However, in case of mutual funds, if you exit the scheme before the holding/ lock-in period, you may need to incur penalty charges in the form of exit load.8. Charges involved In mutual fund investments, you mainly incur transaction charges (when you go through an intermediary) and fund management charges (based on expense ratio). SEBI makes the guidelines for these expenses and fund houses need to adhere to the same. For direct equity investments, there are demat, brokerage as well as transaction charges. Mutual Funds have high trading volumes. This, in turn, brings down the per-transaction cost as compared to an individual investor with lower trade volumes. Conclusion There is no best investment channel that will hold good for each and every person. Both routes have their own merits & demerits. The final choice depends on you and your needs/ priorities. Direct equity investing can be highly rewarding for individuals with in-depth knowledge of the markets and high-risk appetite. However, usually, retail investors do not possess such thorough market understanding. Some may not be able to dedicate so much time to research or monitor the market trend or movements. In such situations, it is advisable to take the mutual fund route and leave the investment decisions to professionals or fund managers. They can suggest the best mutual funds to invest in as per your goals, needs and risk profile. Financial experts like IndiaNivesh have helped thousands of investors optimise the value of their investments. With more than 11 years of experience in the Indian markets, they are adept at understanding the specific needs of each investor. They offer a wide range of financial services including mutual funds, equities, derivatives, insurance, commodities, PMS, investment banking, corporate advisory, wealth management, etc.  With an expert like IndiaNivesh, you are sure to make the best out of your hard-earned money.Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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Debt vs Equity – Striking Balance between Debt and Equity

Posted by Mehul Kothari | Published on 11 Nov 2019

With a wide variety of investment vehicles available in the market, it can be challenging to select the right one to invest your hard-earned money. From company stocks, gold, real estate, bank FDs, debentures and bonds, to mutual funds and more, there are numerous avenues for investment.  But even before you decide the right investment scheme, the first task is to determine if you are looking to invest in equity or invest in debt. Most investments are typically categorised between debt investments and equity investments. For instance, if you invest in an equity-based investment, it means you are directly or indirectly purchasing company stocks, and your returns will be related to how that companies perform. Say, you purchase 100 shares of a leading tech company; here, your returns will be based on the stock dividend which the tech company will pay and the rise or fall of the value of the company shares. Equity-based investments can be risky. And because of its high-risk factor, they typically offer a higher return rate in the long run. On the other hand, when you invest in debt, you lend money to an individual, a company or a government establishment. With debt investments, your returns may not be directly related to how the borrower performs. For instance, if you purchase corporate bonds worth Rs. 10,000 and the company makes a profit, the returns will be the same as if the company had earned no profit at all. Debt-based investments are considered stable. And hence, they earn a low rate of return.As an investor, you aim at profiting from your investments. However, to gain optimum profit, you need to analyse your risk profile. Once you know that you can choose between the two avenues once you know which option offers what benefits. Hence, it is essential to know the difference between debt and equity capital to get the best out of your investment. Most people assume that all mutual funds are alike. On the contrary, there are various types of mutual funds, and primary among these are equity funds and debt funds. The chief difference between equity fund vs debt fund lies in the way the money is invested. When you invest in debt funds, you are investing in fixed income securities. On the other hand, equity funds primarily invest in equity shares and related securities. Equity funds and debt funds have sharply contrasting features that decide how the respective schemes invest and behave, determining their outcome.To ensure you receive the best out of your investment, look into asset allocation. It can mitigate risks and help you enjoy the benefit of diversification, while at the same time offering you control over your assets and investments. Asset allocation is a strategy an investor uses to structure their portfolio. Depending on your financial goals and risk tolerance, you can spread your investments between equity and debt. For instance, two friends may have the same financial goal but different asset allocations. While one may have a greater risk tolerance and thus be inclined towards assigning higher resources to equity capital, the other with a lower risk tolerance would look towards debt investments after evaluating the risk and capital needed towards the goal.Wealth creation requires continual and planned investments to determine your financial goals. It is wise not to place all your eggs in one basket; financial experts advise allocating investments among various asset classes. As a critical strategy that can lower your risk and potentially enhance your returns, it is vital to understand debt-vs-equity and how it can work for you.Striking a balance between equity and debt is a powerful concept that is mostly ignored. Regardless, it is easy to execute. Depending on the time frame of your investments and the amount of risk you can bear, you may want to maintain a specific portion of your financial investments in equities and the rest in debt and fixed income. This means that if the proportion of a particular asset class veers away from the desired ratio, you can move your investments from that asset class to another one to balance your portfolio. Accurate asset allocation is critical to financial empowerment. Prudent asset allocation requires you to answer• Where you should invest?• How much do you need to invest?• How can you invest?When answering these questions, you identify asset classes and the amount you wish to hold in your investment portfolio. Here, one’s age becomes a critical factor in asset allocation as it changes according to the investor's life stages. For instance, a young investor may have a different financial goal as compared to a middle-aged investor. With regards to long-term financial goals, asset allocations must be adjusted periodically based on market conditions and the investor's age.Typically, equity-based investments are pegged to provide higher yields than debt-based investment. If you are considering equity in the form of stock investment, it requires careful financial analysis to gauge the health of the company. Typically, it can prove beneficial to examine the balance sheet and cash flow statement of the company, and its profit and loss account. Analysing a company's financial health can be crucial in making smart equity investment decisions. Doing so can help you to know the company's performance and compare it with its contemporaries in the same industry.On the other hand, while debt-based investments may offer lower returns, they are critical and serve useful purposes. For instance, they are often used to maintain one's money temporarily while waiting for a suitable equity-based investment. The goal of allocating your assets is to get a return on your investment while managing and controlling the risk at the same time. That being said, there will always be market risk, and it can be impossible to eliminate risks altogether. However, with intelligent asset allocation, you can cut down investment risks, particularly, risks that come with just one specific investment. For example, if you invest entirely in the shares of one company, it could make you vulnerable to the risks that the particular investment could reduce in value. By diversifying your finances, you eliminate this risk while giving your investment the opportunity of making money with one asset class even if the other is declining.TakeawayIt is always an excellent time to look into your asset allocation and understand if your investment portfolio is where you would like it to be. For example, if you observe that your current portfolio is heavily dependent on equities, you may want to consider adding debt investments. You can merely purchase more of debt investments such as debt mutual funds or exchange one asset for another until you have accomplished your expected allocation. Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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  • Online Trading – 5 Essential Tips for Trading Online in 2020
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