Wealth creation needs time and patience. Investing should be in the proper manner so that our goals are achieved. Initially, stock picking and portfolio building thereafter are the main building blocks of investing. There was a time when the buy and hold methodology worked like a charm since most investors had limited information about the developments in the economy. In this blog, let’s read how to monitor your AI stock portfolio.
Minor changes were easily neglected.
Therefore, traditionally, if they had invested in good-quality stocks, then over the long-term, they managed to earn generous returns.
However, in this information added era, there a 360-degree change in the system since the internet has made ignorance obsolete. There new dawn in investing, and if you want to succeed as a stock investor, just buying and selling doesn’t work!
That’s right folks!
Then what else do you need to do?
Monitor your stock portfolio!
Monitoring your stock portfolio is as important as populating your portfolio with the right stocks. In fact, it’s more than installing the best stock portfolio tracker, analysing the output or hedging.
What does portfolio monitoring mean?
When I discuss portfolio monitoring with fellow investors, most of them start the conversation with having to install the best tracker to track their profits and the stock movements in the portfolio.
Well, according to me this is just a part of the overall monitoring process, there is much more to it than merely the current market price!
Since the financial world doesn’t work with a set of rules, and most interestingly when investors or experts conclude that ‘these are the bucket of rules/circumstances/points’ which might be affecting the performance of the stock prices, the rules change!
Strange right!
A long-term stock investor should focus on the fundamental aspects of the company, its financial performance, and its operational and managerial strength. But we live in a world where a single social media post can make or break a company. Hence, the traditional buy and hold strategy where you invested and forgot about it for 5-10 years doesn’t work.
One needs to be constantly on toes with knowing and understanding the updated about how the company is performing, its credit rating, and any specific developments that can influence investor or buyer sentiment.
Not to forget the scams and defaults!
Do you remember the Satyam Computers case!?
Oh! I’m already crying!
These are live testaments that some management teams will try to achieve success at the cost of the shareholders. Needless to say, monitoring stocks is a must.
Before we deep dive into some tips to help you monitor your equity portfolio, I would like to mention that you should try to avoid tracking the market price of stocks regularly by using a portfolio tracker or calculating your gains at the end of every trading day.
Trust me, else your mental peace will be eroded!
Constant tracking of stock prices can induce an emotional reaction deviating you from your long-term investment plan. You’ll feel anxious and overwhelming can finally turn to time the market to make quick profits.
What about your plans and goals then!?
Don’t worry let’s understand how to monitor your stock portfolio yourself!
Monitoring stocks efficiently means keeping track of the company’s performance. And not the stock price movements.
Here are some tips that can help answer the question – how to monitor your stock portfolio:
1. Keep Yourself filled in with the Latest News About the Company
There are many factors that influence the performance of a company in specific, and industry as a whole. These can be political, social, economic, or other macroeconomic events that can affect the performance of the company. Hence, it is important to keep yourself abreast of all the latest news and events that can affect the company. Also, ensure that you keep yourself updated about any announcements made by the company.
2. Analyse the Quarterly Results of the Company
All companies in India release their financial results every quarter. Usually, companies release them within 45 days after the end of the financial quarter. Ensure that you analyse these results carefully and understand the financial performance of the company. There can be losses in a specific quarter and profits in the next. However, you must ensure that you try to understand the bigger picture and look at the potential of the company too. Also, it is important to consider the overall economic scenario while assessing a company’s financial performance.
If you find that the company is regularly declaring below-par results, then you might want to investigate the reasons behind it and make appropriate decisions.
3. Look for Corporate Announcements
All companies are mandatorily required to inform the stock exchange about any event that can impact the market price of its shares. This can be a huge list of events like launching a new manufacturing facility, mergers or acquisitions, change in the senior management, buying or selling shares by the promoters, etc. The stock exchange updates all such announcements on its website.
It is important for investors to be aware of all such corporate announcements as they would offer a clearer picture of the direction in which the company is headed and make informed decisions to buy more stocks or sell the existing ones.
4. Be Aware of news that focuses on the Changes in the Shareholding Pattern
Companies are also required to declare their shareholding pattern once every quarter. Typically, companies do it after every calendar quarter and update the information on their website.
As an investor, you must ensure that you look at this aspect carefully and compare it with the shareholding pattern over the earlier quarters.
It will allow you to understand if the promoters are increasing their stake or pulling out.
This is an important aspect since a promoter increasing the stakes in the company usually implies a good potential for growth since the promoter (who has inside information of the company) is increasing his exposure.
This also implies that if promoters are steadily withdrawing from the company, then you need all antennas up and try to understand if there are any potential roadblocks that the company can face.
5. Tapping the Credit Rating of The Company
Like individuals, companies have a credit rating too. Rating agencies like CRISIL, ICRA, CARE, etc. review the financial condition of companies and rate them once a year.These ratings are published on the websites of these agencies along with a document detailing the pluses and minuses of the company with respect to credit.
Needless to say, a company with a poor credit rating is a negative sign since it implies that the management cannot manage its debts efficiently and can put the company into jeopardy in the future.
6. Track the Stock Price
Spoiler Alert!: Track the stock price only if you think this might now affect you emotionally and take impulsive decisions!
Although this is not a recommended method of monitoring your stock portfolio, if you don’t have the time to monitor your stocks regularly, then you can look for a share portfolio tracker that allows you to monitor the share price every day.
However, you need to ensure that this is for monitoring purposes only and must keep emotions at bay so that you don’t make any emotion-driven decisions. Monitoring prices is like a post-facto method where you will know about the price drop/surge before you know the reasons behind it. Hence, it can help you gain an understanding of the company.
7. Assess the Promoter’s Pledge of Shares
Investors think this part has the least importance and they don’t even consider looking in this part.Along with the shareholding pattern, companies also declare details about the pledge of promoter’s shares every quarter. As an investor, you must look at the pledge amount carefully as it is usually one of the first signs of financial trouble in the company.In the event that the promoter cannot repay the loan, the lenders will sell the shares in the market causing a negative ripple effect on the share price. Hence, you need to think twice before investing in a company where promoters have pledged their shares.
There are numerous ways to monitor stocks apart from the ones listed above. Some investors attend Annual General Meetings (AGMs) held by the companies to better understand the company’s performance. There can be different ways of approaching this but the key lies in ensuring that you know where your hard-earned money is invested and stay updated every second.
Remember, using a stock portfolio tracker is not enough!
To be a successful stock investor, you must ensure that you monitor your AI stock portfolio comprehensively and regularly.
Hope you got an understanding of how, why and where to monitor your stock portfolio!
Until next time….
Happy Investing!
