(10) Review Your Portfolio Annually
It is one of the most desirable steps to build a well-balanced stock portfolio. Economic situations are not constant throughout a year. It can change to significant extent with time.
You need to check or review your portfolio from time-to-time. It doesn’t mean that investors should check their stocks everyday. Everyday checking of stock portfolio might end up feeling anxious over the value of investment.
It will be reasonable to review your portfolio once or twice a year. It is because market movements may cause your initial weightings to change.
It is also necessary because even a fundamentally strong stock can become a risky stock due to business difficulties. Therefore, timely review can help you to maintain a solid portfolio.
(11) Rebalance Your Portfolio
It is one of the most important steps to design a strong & rightly managed portfolio for beginners. No single stock portfolio can remain equally fit in all market conditions.
Time can make even the best stock portfolio out of balance naturally. It is perhaps the reason why investors need to perform periodic checkups & rebalancing.
According to a post published in Fidelity, if you don’t rebalance, a good run in stocks could leave your portfolio with a risk level.
This risk level could be inconsistent with your goal & strategy. Similarly, if your investment goals & risk tolerance is changed with time, you need to shift your investment from high risk stocks to low risk stocks.
On the other hand, if a stock from your portfolio has achieved its target, you need to quickly cut its stake.
As a guideline, you may also look for rebalancing if your stock allocation moves away from your target by more than 10 percentage points. Thus, a timely rebalancing of portfolio can help you to stay tuned with markets.
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