How to manage a stock portfolio

By iTrust Financial Advisors (www.iTrust.in)

Retails investors often trade in stocks without understanding the deeper implications of their buy or sell decisions. When you invest in stocks, you implicitly are building a stock portfolio.

Here is a set of actionable steps that you must keep in mind to help you with building your stock portfolio.

1. Diversify: Just buying stocks in 1 or 2 companies is not enough. You could be taking on too much risk through a concentrated portfolio, akin to putting all your eggs in one basket. Ideally, your portfolio should have no more than 20-25 names to give you the benefits of diversification.

However, this also does not mean that you can have just say 5 shares of one company and 2 shares of another, because that is all you can afford because you can’t create wealth through just purchasing a handful of shares in a company.

Good stockpicking is about knowing how to allocate your capital efficiently across your best ideas in a diverse portfolio.

2. Review Your Exposure Frequently: While one investment strategy is to buy and hold, that does not imply that you do not manage your exposure by ignoring your portfolio. Market prices move, sometimes dramatically.