Words Of Wisdom - Techniques to manage your portfolio effectively in NEW TO TRADING & INVESTMENTS? - Invest primarily in growth stocks, Stocks which have shown consistent results in the past – in terms of profits,NPM,Sales Growth, ...
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08-11-2010 09:53 PM
Techniques to manage your portfolio effectively
- Invest primarily in growth stocks, Stocks which have shown consistent results in the past – in terms of profits,NPM,Sales Growth, have a very good balance sheet. Interest coverage should be very high(Liabilities should be low)
- If your stock has started falling because of some reasons which will affect its fundamentals, exit out of the stock immediately
- If your stock has started falling because of overall market weakness, accumulate more of that particular scrip
- If your stock has started falling because of sector weakness, diversify some of your funds from that stock to stocks in other sector which you believe has growth potential
- Don’t invest in business which you don’t understand – For example if a particular company which you know is a growth stock, is entering into a new business which has huge technology risk associated with it, then don’t enter into that stock. Keep that stock in your watch list and enter into that scrip only when results show up
- Reinvest part of profits into penny scrips (Within 100 cr market capitalization) only with profits generated. You should have strong reasons to believe that penny scrip has the potential to perform.
- The maximum exposure of a particular stock in the portfolio should be 20%. Even if you are extremely bullish on a particular scrip you cannot exceed this limit. Accumulate to max of 5 more % with profits. This rule also holds for exposure to a particular sector.
- Diversify the investment in terms of various sectors – Don’t invest majority of your money in allied sectors say like Infrastructure company and Infrastructure financing company – Because the movement of their stock prices has good chances of being correlated.
- Once you are confident about the fundamentals of the stock, and then take help from technical analysis to time the market. For example, just because a stock with a bad fundamental has reached a support level, I will not take a position in that stock. The following are the technical indicators that you can use to make a call
1. Support and Resistance Levels 2. RSI Indicator 3. Triangular Pattern
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