How to Manage a Stock Portfolio

Consider hiring a professional investment adviser to help you establish goals, assess your holdings and develop a strategy for reaching your goals. Alternatively, follow these steps to make smart decisions about your portfolio.

Difficulty: Challenging

Instructions

Things You'll Need:

• Internet Access
• Brokerage Accounts
• Computers

1. Keep your goals in mind as you buy and sell, changing tactics as necessary to meet your goals.

2. Diversify. Put your money in a variety of stocks and industries, recognizing that some investments will be cyclical, others will be slow-growing and others will be highly risky.

3. Resist the temptation to focus on the short term. As much as you reasonably can, leave your stocks alone.

4. Invest in what you know. If you don't know much about a particular industry or company, conduct some preliminary research.

5. Make higher-risk investments only after you have established a sound and diversified portfolio.

6. Study the companies in which you have invested. Read quarterly and annual reports, proxy statements, registration statements and news reports. The better informed you are, the better your decisions will be.

7. Admit mistakes. Although you want to invest for the long term, there will come a time when you must dump a losing stock.

Tips & Warnings

• Determine your appetite for risk before you invest.
• Watch out for scams. Hang up on brokers who demand hasty decisions, promise dramatic returns or don't take no for an answer.

on 11/22/2005 Some of my conclusions on portfolio management involve how to pick stocks, when to buy those stocks, when to sell stocks from the portfolio, and how to respond to market forces in the face of a correction (bear market), or an overall market advance (bull market).

In general, it is imperative to identify the strongest stocks for inclusion in your portfolio. Personally I have found that stocks that demonstrate persistence in revenue growth, earnings growth, are free cash flow positive, and have a solid balance sheet have the best potential for appreciation.

Second important point is to avoid losses. In other words, sell stocks quickly when they decline and cause you to suffer paper losses, and hang on dearly to the stocks advancing in price, selling them only piecemeal at targeted appreciation points.

Try to listen to your own portfolio; avoid replacing stocks when they decline. Suggesting possible weakness in the market and adding new positions when your own stocks are doing well.

That is quite a bit to handle, but for me it has become common-sense advice that has resulted in a discipline that prevents me from whip-sawing in and out of equities without a clue as to the proper next step!