How & How Often to Monitor your Portfolio (Adrenaline Rush vs Sensible Investing)
In the previous few posts, we had discussed how to choose stocks for investing and when to buy or sell stocks. We also discussed the importance of being disciplined in our approach ….be it buying or selling. The only way to achieve this is by making simple rules, these should be our rules based on our own experiences and knowledge gained. We can always take guidance from someone else’s knowledge and experiences but in the end, we need to tweak these to suit our greed — fear scales. Once made, these rules are to be treated as Laxman Rekha and irrespective of what people around you are saying, you must have faith in your own rules. Needless to say here that, these rules therefore must be well thought out and back-tested multiple times. For rookies like me, a word of caution too, ……. more often than not, whenever you see people talking ……how and why a particular stock is going to cross all boundaries and will bring you untold riches……get alerted …….and even if it is meeting your criteria of investment …….double-check your research ……as most likely this share is being manipulated to higher levels for short term gains. Imagine …….if you as a commoner is hearing about it……the big fishes would have heard about it a lot earlier and probably invested in it too …..In most probable scenario, the stock was losing momentum much earlier than expected and therefore, it is artificially being pumped so that big fishes could make more money……..Be it Alok Industries, Vikas Multicrop, or Future Retails…….the same pattern is repeated again and again. Therefore, even if you are compelled by your greed to make few quick bucks, I would once again urge caution. Only a tiny percentage of your overall portfolio (certainly not more than 1 to 2 %) can be risked with such shares and the golden rule would be to buy on sentiments and sell on confirmation or news.
Coming to the discussion thread for this post, which is how and how often to monitor your portfolio? This is a tricky question. If you monitor too often; say on daily basis — you are more likely to be swayed by your emotions caused by daily oscillations of the share price. At the same time, if you monitor irregularly or the gap between each monitoring is too large, you may miss out on maximizing your profits and may incur some losses too. I generally propose monitoring on weekly basis. Firstly, it is super convenient for people like me, who do not want to get distracted from their core jobs and secondly, it would be far easier to spot the trends with a five-day trading cycle followed on NSE or BSE (10 candles if you are using 4 hourly candles on the technical chart). Beginners can simply choose to check the price movement on Google. Each share in your portfolio does not require a detailed analysis. Just monitor the price momentum and see if it is generally following the trend you have predicted for it. In case, there are no trends visible at the first glance — do not imagine trends and certainly do not use an overcomplicated over cooked theory. Most of the blue-chip/ large-cap shares would rarely show any movement on daily/ 4 hourly charts and only if you use a weekly chart, some trends may appear faintly. Always remember that, you chose such shares because they are stable and less volatile and therefore, lack of any noticeable movement in their share prices is an extremely good thing.
Long ago, even before I started investing, one of my father’s friend had casually said that, if you do not check, how much interest has been generated in your Fixed Deposit account on daily basis or how much growth is being shown in the mutual fund you have invested in, ……..why bother about your investments in share market on daily basis??? Surely you did not imagine that the money you have invested in the equity market would double itself or get reduced to half overnight ……..then why even bother checking it daily. I think this is one of the best advice for all novice investors, who are systematically investing in the share market based on pure analysis.
Always remember that, in the end, we all are human and no matter how much we try to reign in our greed and fear, these will always play an important part in all our decisions. In the context of share market investing, the more often we check a particular share, the more our greed or fear gets reinforced and this may force us to make some unwise decisions, which we might regret later. Therefore, the strategy which I follow is……..do thorough research beforehand and decide on buying as well as the selling prices for any share. Thereafter just wait for it to reach its target price. The only exception to this rule is that……….. if the financials change or any significant news, which has the potential to disrupt the business model itself ….reanalyse your entry and exit points. In short, we have to have some rules to take care of our emotional spikes, which are generally linked to over-exposure to news and market undulations.
That’s all, for now, guys, writing this post provided me with the much-needed break from my studies for my ongoing Unit Tests. I hope, the easy reading will provide you too with a breather, while cementing few basics of investing. Before I say goodbye, let me once again share the graph of Britannia, as this is almost reaching the Buy Zone, which we discussed in the last post. In the graph below, I have also marked out one more inflection points line below the original …..for risk-takers. Though, personally I feel that, the price should recurve from the original inflection line. However, to take advantage of such situation, if at all the price reaches the lower inflection line, I would be keeping some spare funds to boost my profits.
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