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Many stock investors often dream about having an ideal stock portfolio where none of the stock is a laggard. This is however a 'never-to-be-true' scenario as one cannot correctly analyse how the stock would perform over a year from purchasing it. In this post I would guide readers who are new to stock markets/investing, how to build their stock portfolio. Choosing a correct stock is most important of all the requirements for a successful portfolio. This involves sheer analysis acumen of the person. Analysis involved includes tracking the stock performance of the past couple of years, smartness of the management of the company.
Is it too early to directly start the detailed analysis...PAUSE...lets start with the introduction about STOCK PORTFOLIO!
IF I compare a person's stock portfolio to a house then I can find various similarities in two of them. Actually building a stock portfolio is like building your house where different stocks represent different rooms and If one of the room is filthy then a person hates it and doesnot want to enter the room again. All the rooms should be rightly furnished/lightened so that the overall experience feels pleasing and comfortable.
Step-by-step guide for Stock portfolio: 1. Create a blueprint: A person should make a blueprint which clearly states following bullet points: a) Reason for stock portfolio, what a person wants in his portfolio b) What is the goal of the investment. c) How long a person can invest/hold d) How much should a person put into cash, bonds, and various types of stocks. 2. Know your portfolio and make periodic calculations for the market value of all your investments, keep yourself updated with present trends in these investments in order to find perfect time for exiting one or many . 3. Make sure your stock portfolio is strictly in accordance to the blueprint you made, If it is not so then your house is not being made according to the plan, which would haunt you later in case of emergency. a) Remove any of the redundant investments you have made, If you have 3 large-cap bond investments then try to exit two of them as all would give similar returns/risks and because similarly you never want your house to have 3-4 store rooms. 4. Balancing the stock investments is the key : Generally stocks give higher returns then bonds, hence there is high possibility that your investments would include higher percentage of stocks as the time passes, thus increasing your risk percentage. Hence do a periodic check that your investments as exactly in accordance to the initial blueprint. If you want to invest more in stocks over time then invest the profit money which you received till now from your investments, This would mitigate risk and your principle amount would be much safer. 5. Analyze your Investments periodically: There is a high possibility that the mutual funds part of your investment doesnot have the same rating which you decided in your blueprint, hence you need to sell them and purchase the ones which fit in accordance to the blueprint. You should sell stocks only when it has reaced the target sell price you made during the blueprint creation. These 5 steps are very basics which should be followed by everyone who wants to make his/her stock portfolio. Still there can be more additions to above steps which I might have missed, so using your own brain is foremost important thing needed for making stock portfolio. Note - These steps doesnot gurantee positive returns always, read the disclaimer at the bottom of the blog.
Is it too early to directly start the detailed analysis...PAUSE...lets start with the introduction about STOCK PORTFOLIO!
IF I compare a person's stock portfolio to a house then I can find various similarities in two of them. Actually building a stock portfolio is like building your house where different stocks represent different rooms and If one of the room is filthy then a person hates it and doesnot want to enter the room again. All the rooms should be rightly furnished/lightened so that the overall experience feels pleasing and comfortable.
Step-by-step guide for Stock portfolio: 1. Create a blueprint: A person should make a blueprint which clearly states following bullet points: a) Reason for stock portfolio, what a person wants in his portfolio b) What is the goal of the investment. c) How long a person can invest/hold d) How much should a person put into cash, bonds, and various types of stocks. 2. Know your portfolio and make periodic calculations for the market value of all your investments, keep yourself updated with present trends in these investments in order to find perfect time for exiting one or many . 3. Make sure your stock portfolio is strictly in accordance to the blueprint you made, If it is not so then your house is not being made according to the plan, which would haunt you later in case of emergency. a) Remove any of the redundant investments you have made, If you have 3 large-cap bond investments then try to exit two of them as all would give similar returns/risks and because similarly you never want your house to have 3-4 store rooms. 4. Balancing the stock investments is the key : Generally stocks give higher returns then bonds, hence there is high possibility that your investments would include higher percentage of stocks as the time passes, thus increasing your risk percentage. Hence do a periodic check that your investments as exactly in accordance to the initial blueprint. If you want to invest more in stocks over time then invest the profit money which you received till now from your investments, This would mitigate risk and your principle amount would be much safer. 5. Analyze your Investments periodically: There is a high possibility that the mutual funds part of your investment doesnot have the same rating which you decided in your blueprint, hence you need to sell them and purchase the ones which fit in accordance to the blueprint. You should sell stocks only when it has reaced the target sell price you made during the blueprint creation. These 5 steps are very basics which should be followed by everyone who wants to make his/her stock portfolio. Still there can be more additions to above steps which I might have missed, so using your own brain is foremost important thing needed for making stock portfolio. Note - These steps doesnot gurantee positive returns always, read the disclaimer at the bottom of the blog.
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