There are 5 effective principles in portfolio management as follows:
1. Establish investment strategy
Establishing an investment strategy is the crucial first step in portfolio management. This requires investors to choose a timeframe and investment method that aligns with their goals and market conditions. Here are some specific suggestions:
- Time-based strategies:
- Short-term investment: Focus on quick profits over short-term periods ranging from a few days to a few months.
- Medium-term investment: Seize opportunities from longer-lasting trends over time ranging from one year to several years.
- Long-term investment: Select stocks with stable growth potential for long-term investment over a longer period of time.
- Method-based strategies:
- Fundamental analysis: Evaluate fundamental factors of companies to select stocks based on intrinsic value.
- Technical analysis: Use charts and technical indicators to predict future stock price trends.
- News and macroeconomic analysis: Monitor and assess news and events affecting the market to make investment decisions.
2. Investment Portfolio Allocation
Diversification is a key principle for risk reduction. By allocating capital across various sectors, industries, and types of assets, you can mitigate the negative impact of volatility within a specific industry or stock.
However, it's important that portfolio allocation is done purposefully and sensibly, clearly reflecting the investor's investment goals and preferences. Avoiding over-diversification in portfolio allocation can make it difficult to manage stocks and structure the portfolio effectively.
3. Regular Monitoring and Evaluation of Performance
Managing an investment portfolio requires a consistent process of monitoring and evaluating performance. This ensures not only maintaining discipline but also early detection of any market fluctuations or specific company changes within the portfolio. Plan to monitor and evaluate the performance of each stock in the portfolio, updating information on stock movements to adjust promptly. This allows investors to adapt quickly and make necessary adjustments to maintain or optimize their investment performance.
Additionally, continuous learning, knowledge updates, and market research are crucial in the volatile and evolving stock market. The market is constantly developing and evolving, with the emergence of new factors such as advanced technology, changes in economic policies, and global market fluctuations. In this context, maintaining a solid knowledge base and staying updated is essential not only for survival but also for optimizing investment performance.
4. Adjust Portfolio if needed
Financial markets are constantly fluctuating, and economic conditions can change over time. Therefore, adjusting the structure of your investment portfolio is crucial to reflect these changes. By doing so, you can ensure that your portfolio is appropriately adjusted to meet specific investment goals and capitalize on emerging opportunities.
5. Control Emotions
An integral part of portfolio management is controlling emotions. Investment plans should be based on data, specific strategies, and adherence to these plans is important to avoid decisions driven by emotions. By maintaining moderation and discipline, you can ensure that your investment decisions are made based on logic and research rather than emotions.
Through this article, VPS has unveiled 5 principles for effective portfolio management in investing. We hope this information will help you through your investment journey.
