Most first-time investors invest and forget, believing their money will work it out themselves. But having planted the seeds, your investment now needs tending to grow. Hence, monitoring your portfolio through portfolio management services could be a crucial step in achieving your goals.
Do not ‘set it and forget’
Once you create an investment portfolio, it needs to be well managed. You could manage it with the help of a portfolio tracker as an online tool. Portfolio management in itself is an art that involves building and managing various investments to reach the desired outcome.
Usually, long-term equity investments facilitate wealth creation owing to its high returns. While this is true, the concept of ‘set it and forget it’ may not be ideal. You need to actively manage the portfolio with an online portfolio tracker to outperform the market index.
Here are some steps towards a successful portfolio management:
What is portfolio management services?
- Create a roadmap
You need to plan ahead before building an investment portfolio. Take a look at your financial situation, figure out your risk taking ability, and identify your goals. Have a plan in mind for every purpose. Planning makes your investing journey smooth.
- Invest based on your goals and risk appetite
The important thing is to decide asset allocation as per your risk appetite and goal. Asset allocation helps you decide what proportion of stocks, bonds, gold etc. to invest in. Right asset allocation aims at balancing out the risk and return in accordance with your personal financial goal. Along with asset allocation, it is also important to make the right pick of assets. For example, when it comes to choosing equity shares, make a diversified choice. Invest in shares of different sectors as no particular sector performs well all the time.
- Constant monitoring
To be an active investor, you need to monitor and review your portfolio periodically. It is also important to keep a tab on emerging opportunities in the market. With changing economic conditions and rising competition, it is crucial to keep a continuous watch on your stock.
Active rebalancing is the key to staying on track with the right asset allocation strategy. Rebalance your portfolio in accordance with your financial situation, goals and risk appetite. Follow a disciplined approach and keep stirring your portfolio to make the most out of your investments.
- Seek expert help
If you are hard-pressed for time, unable to handle it all by yourself and believe you might need an expert eye to oversee your portfolio, seek the help of a financial expert. After all, deciding the right allocation needs knowledge and expertise!
Through the use of benchmarks, you can get an idea of your portfolio's performance in relation to the stock market. At best, you expect your returns to mimic market ups and perhaps also exceed the relative norms. This is why smart investing is crucial to portfolio success.
Smart investing requires proper planning, right selection and constant monitoring. By using a stock market portfolio tracker you can pursue pre-set goals. Although there is no sure-shot formula for guaranteed success, a disciplined investment approach can potentially elevate the chances of higher growth in the long run.
Now that you have set up a robust portfolio, you begin to plan your journey towards your investment goals. With a disciplined approach, you follow a desired asset allocation (blend of stocks and bonds) that best matches your risk profile. But, what you did not anticipate is market volatility! Since markets tend to fluctuate without warning, it can cause your portfolio to veer off track. This is when you need to fit in a strategy to get it back on schedule. The entire process of doing so is called rebalancing. What is portfolio rebalancing?The process of realigning your portfolio back to target asset allocation, by buying and selling a portion of your portfolio is referred to as portfolio rebalancing.For example, you decide to invest in equity and bond equally. A year later, the equity market outperforms and you put more money in equity investment. This change may seem like a good strategy on paper but in reality, your portfolio is exposed to greater risk than before. The concept of rebalancing goes way deeper than just sticking to the original asset allocation. Rebalancing is a complex exercise and a number of factors need to be taken into consideration, such as age, income level and investment requirement. Your target asset allocation may also need to change as you age and your growing needs. The change in target asset mix also calls for rebalancing. For example, with age you may want to shift from an aggressive asset allocation strategy to a conservative asset allocation strategy. Let’s say, you are currently at pre-set asset allocation of 70% equity and 30% bonds, which has a higher exposure to risk. As you age and get closer to your retirement years, you may want to play safer with your investment, for example move to an asset mix of 40:60 equity and debt. Given your risk appetite, you may need to relook at your portfolio accordingly.Why do you need to rebalance? For active risk management When the market is on a roll, a larger stock investment may seem good. But, when the market drops unexpectedly, you are exposed to a higher risk of price drop. Thus, rebalancing your portfolio on a timely basis can help keep the risk balanced. To realign your portfolio based on your investment goals and needs Your life circumstances, overall goal and risk level tend to change over time, which calls for a rethink on your asset mix and portfolio rebalancing. The asset mix that worked for you 10 years ago, may not be appropriate for at the moment, when you maybe only a few years away from your goal. Type of portfolio rebalancing strategies Tactical rebalancing: This particular strategy is applied based on external events and market environment. Basically, it is suitable for active investors who keenly follow the market. Periodic rebalancing: A systematic application of periodic rebalancing is helpful in reviewing the portfolio on regular basis and can be rebalanced if necessary. You can define a percentage of deviation to trigger rebalancing. For example, your original asset allocation is 60% equity and 40% debt with a deviation of 5%. Rebalancing will trigger only when the equity exposure shoots up to 65% or comes below 55%. A well-diversified portfolio includes various assets (stocks, bonds, gold and cash etc.) with different risk and return characteristics. A diversified portfolio also includes assets with differing correlation that do not move in the same direction during change in market condition. Thus, rebalancing a portfolio allows investors to capture the gain during market volatility with these uncorrelated assets. For example, gold and equity have an inverse relationship. When gold prices rise, stock prices tend to go down and vice versa. Thus, it is important to look at the market condition while rebalancing your portfolio.. Rebalancing may also involve costs such as tax and other transaction fees. Hence, rebalancing is a complex process that depends on various other factors like fluctuating market conditions, shift in financial circumstances, lifestyle changes and costs involved. Seeking expert help can benefit in managing risk professionally along with generating returns for your desired goal.ConclusionPortfolio rebalancing will depend on your risk/return profile. Ultimately, it is an important risk control tool that will help you to stick to your investment plan and goals regardless of market conditions changes.
Every investor dreams of success. But, investing is not an easy art. There is no dearth of strategic portfolio management advice around promising instant success. But how does one sift through the clutter to get the right advice? Unfortunately, most individual investors fail to manage their investment portfolio on their own. With volatile markets and a glut of information, there is the danger of making a catastrophic move. To safeguard one’s portfolio and pre-empt risks, it is important to take the right kind of precautions. Here we understand what is strategic portfolio management.First things first, take controlIn spite of managing your own investment portfolio it is not bringing you the kind of returns you had in mind, or appears to be stuck, the primary thing to do is not to panic. Find out the cause and identify investments that are contributing to overall non-performance. Take requisite action on your portfolio, keeping in mind your long-term perspective. Do not let fear rule your decision making abilities. Clarity on the situation and a few portfolio management tips can help you decide when to hold them and when to sell.Let’s look into some investment strategies and portfolio management tips that can help you decide: Average down strategy Average down strategy aims to reduce your average cost in a stock. You buy additional units of stock that have slipped in price to average out the cost. Let’s take an example to understand this. For instance, you purchased 1,000 units of ABC stock at Rs. 50 per share. The price per share then drops down to Rs. 45. Now, if you buy additional 1,000 shares at Rs. 45, your average cost will come down to Rs. 47.5. Similarly, this strategy could also be applied to mutual funds to average out costs. This average down strategy strategy should be applied only if you have researched thoroughly on the company whose stock you hold, and convinced about its future potential, having implicit trust on the management and the company’s fundamentals. With a strong belief in the company’s fundamentals, you can continue to hold it for a long period of time by averaging down the cost. Sell the losers Fact-finding and doing necessary groundwork on the company is useful in ascertaining the company’s future potential. Get rid of the falling investments if the price has dropped and is not likely to recover. This strategy works well when the stock price has been on the wane and the company’s fortunes seem to be under threat. There is no point in holding on to a stock that is underperforming. Mistakes help you become wiser, and the investing process gets better with your learning. But, learning to avoid mistakes makes you a smarter investor. To be a successful investor, you need to have a clear methodology. Here are a few portfolio management tips to make your portfolio work for you: Draft a solid plan Formulate disciplined strategies Create a diverse mix Have a logical reason for every decision Periodically review and rebalance Do not let your greed and fear drive your investment moves To design, strategize, implement, manage and rebalance your portfolio rightly, you need to have the time, self-drive and most importantly extensive experience. The question is, would you be able to do it all by yourself? Do you have the requisite knowledge, competency and skillsets to manage your stock portfolio correctly?If you are hesitant to do it by yourself, there exists a tailor-made solution called portfolio management services that bring in expertise, knowledge and professionalism to achieve specified goals.ConclusionTo make your portfolio grow productively, follow an investing style that suits your risk profile, asset allocation, financial goal and time horizon. To avoid irrational decisions, conduct further study on your investment choices. A focused portfolio along with a disciplined approach is the key to success.
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