With the right outlook and approach, building wealth can be one of the most gratifying and pleasing experiences in an investor's life. Every investor dreams of building a profitable investment portfolio. However, the question arises, what is portfolio investment? Portfolio investment is a strategy that covers financial goals and mitigates all possible risks. Understandably, it's an uphill task. You will need to set up your financial goals, understand your risk appetite, decide allocations and accordingly pick the right investments. But it is not over yet. Investing prudently also calls to have your ear on the ground, make sense of market information and discern the news to make it work for you. Through investment analysis and portfolio management you can track your investments as you keep building wealth.
Keys for Successful Investing
To evolve as a successful investor, it’s essential to keep an eagle eye on key changes in the market and know how stock market reacts to key economic data. Equity markets are highly susceptible to market changes and actively react to various political and economic changes. Let’s take two major events to understand this.
- Example 1: The Government’s decision to demonetize currency at the end of 2016 had a massive impact on the stock market. Demonetisation resulted in withdrawal of nearly 86% of circulated money in the market. This led to the BSE Sensex’s immediate and huge crash by 1690 points. Some of the sectoral indices of cash-driven sectors such as realty and consumer durables also witnessed a tremendous plunge.
- Example 2: In 2017, the passing of the GST bill had a similar impact on the stock market. The Government’s decision to keep the tax rate low on mass consumption items and exemption of tax on cereals, milk and grains worked positively for FMCG stocks such as Nestle and Marico. Likewise, it had varied impact on various sectors.
In order to make sense of market volatility, investors need to consider various data points such as inflation, GDP trends, global changes and the economy as a whole. The Higher the GDP, greater is the level of income and spending, which ultimately results in higher corporate earnings. Market sentiments vary with such data changes.
Making a smart move
Apart from the bigger picture, some specific elements mentioned below can be taken into account before investing:
- Corporate earnings: Being aware of what is happening in the company whose scrips you hold can help you make a rational decision. Company quarterly reports representing earnings provides a broader picture of the company’s progress towards its targeted annual growth. Along with net profit it is important to pay attention to other details like debt structure, earnings per share, net sales and operating expenses etc. However, analysing these numbers can sometimes, be, easier said than done.
- Analyst ratings: Stock ratings by industry analysts give a measure of the stock’s expected performance for a particular period. Ratings are sometimes simply labelled as ‘buy, ‘hold’ or ‘sell’. Sometimes, ratings are given as ’equal-weight’ ’under-weight’,‘ ‘outperform’’ and ’underperform’. These ratings are assigned based on various valuations, market trends, competitive advantages, company’s earnings, prospects and other factors. It is worthwhile to consider such informed opinions.
Smart decisions always needs smart skills. Some skills required to make sense of news and use it for portfolio success include:
- Critical thinking: Strong critical thinking is important to make SWOT (Strength, Weakness, Opportunities and Threats) analysis of financial reports.
- Anticipate: Evaluating possible impact of major events and its effect on the financial market is important in making smart investment decisions.
- Outside the box research: Being mindful of various scenarios and being able to associate their possible impact on various market activities is crucial.
- Competitiveness: It is required to stay innovative and tap good opportunities.
Every investment decision needs extensive research and a constant check on the financial market. Being informed on market developments and analysing them is highly crucial in making a smart move.
Thus, it is advisable to avail professional help. You could use the services of a stock portfolio manager to guide you in how to create an investment portfolio. Portfolio management services offer a customised portfolio investment process strategized and managed by experts or portfolio managers.
The bottom line to building a successful investment portfolio is to make sense of the news, interpret data while analysing events and predicting every possible outcome. Portfolio managers help build a successful and customised investment portfolio with their knowledge, skill and strategy. Make use of their expertise and proficiency in navigating your financial future and pursuing your investment goals.