Step-by-step approach to handling your stock portfolio

From ArticleWorld

If you have a portfolio , then you care greatly for your financial future. To insure that your portfolio is healthy and strong you will need to a strategy, and there are certain steps you can take to help you. Be warned, that before you follow any of these steps a talk with your financial advisor will be advised.

Five pointers

  1. If you think that setting your money down all in one place is a smart thing to do, you will be wrong. Diversification is the key, the reason is that if your money is in different places, it helps to diminish the possibility of ruining your overall financial health. If you diversify, then making one bad investment will not damage you too much., you have other investments that are still strong and viable.
  2. Read Robert Lichello’s How to Make $1,000,000 in the Stock Market---Automatically. In his book , Lichello talks of his strategy, of having his portfolio routinely go from cash to equities.
  3. Another believer in having your portfolio go from cash to equities routinely is William O'Neil. O'Neil is known for CANSLIM, and he is also the publisher of the Investor's Business Daily. In his book How to Make Money in Stocks O'Neil says that, if you look over your portfolio and observe that your money is center completely around the stock market, then if your stocks drop, it will have to much of an impact on your complete financial health.
  4. A good foundation for your portfolio is the half equities and half cash method called neutral. To be neutral is to figure out the total amount of stocks you want to be handling. About 12 stocks, is good, with up to 24 to 25 various positions. If you go beneath that you will not be diversified enough, and above that will be hard for you to maintain.
  5. Place your sales position at a loss. For example, if your market shares goes to a 8% loss you probably will want to sell. Also, you will want to sell your positions but only after they revert back and break-even. This will happen after the first sale at a net gain. Consequently, if you were to retrace 50% of the highest percentage net gain, you would see that you have sold your market shares more than once. Basically, if you would have gotten rid of 1/6 of a holding at a 90% gain, then the market stock will revert back to a 45%, then to a 1/2 top gain trade, and only then will you now sell all remaining sales.
  6. These sales will be like signs telling you when and how to manage your portfolio. When the price of a stock drops that means sales are bad news and to be cautious. It is then that you must wait with your money to see what will happen. You are exempt from doing this only if your are at your equities are at its lowest. Then you are allowed to sell a stock, that is, to exchange the position with another stock. The “barest amount” is consider half of neutral. If the neutral is for 24 positions is 12, then the barest amount (minimum) would have to be 6 positions while 75% of the worth will be in cash. The double neutral position, is consider the maximum. The targeted gain is a sale of “good news,” so the bullish signal means that it is fine to include another position, therefore moving your portfolio to its full investment.
  7. Although, these seem like complicated strategies it will enable you to shift your holdings from cash to equity in a strong market, and to turn it around in a bearish one. Also, it will help you to avoid losing losses, which means to buy a stock you just gotten rid of for a small loss, only to see the new investments go on and lose some more funds.