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Sir, Consider I am doing SIP on a certain number of stocks. How many stocks can I consider accumulating and when should I have to rebalance every quarterly or yearly basis? Please advise me about portfolio management. Thanks in advance sir.
Portfolio management is a crucial aspect of investment strategy, and the number of stocks you should consider accumulating depends on various factors. These factors include your age, future potential savings, returns earned on existing stocks in your portfolio, valuation, and more.
Let's consider an example: if you have a portfolio of 10 stocks and one stock experiences a significant increase in value, becoming 10 times its original worth while the other 9 stocks do not appreciate, this single stock will represent 50% of your portfolio allocation. In such cases, it's important to assess whether the future potential savings are substantial compared to your current portfolio or if the 10x stock is an anomaly.
To ensure proper diversification, it is generally recommended to allocate a maximum of 2.5% to 5% of your portfolio in each stock, unless you have a strong conviction about a particular stock's potential.
In addition to diversification, you can also use future potential savings as a rebalancing tool. For example, if your projected savings over the next 3 years are equal to the current value of your portfolio, you can easily rebalance by allocating more funds to stocks that have a lower allocation in your portfolio.
Remember, portfolio management is a dynamic process that requires regular monitoring and adjustments. It's advisable to review your portfolio periodically and consider rebalancing on a quarterly or yearly basis, depending on changes in the market, your investment goals, and personal circumstances.
Please note that the information provided is general in nature, and it's always recommended to consult with a financial advisor or investment professional who can assess your specific situation and provide personalized advice.
Sir, Consider I am doing SIP on a certain number of stocks. How many stocks can I consider accumulating and when should I have to rebalance every quarterly or yearly basis? Please advise me about portfolio management. Thanks in advance sir.
Portfolio management is a crucial aspect of investment strategy, and the number of stocks you should consider accumulating depends on various factors. These factors include your age, future potential savings, returns earned on existing stocks in your portfolio, valuation, and more.
Let's consider an example: if you have a portfolio of 10 stocks and one stock experiences a significant increase in value, becoming 10 times its original worth while the other 9 stocks do not appreciate, this single stock will represent 50% of your portfolio allocation. In such cases, it's important to assess whether the future potential savings are substantial compared to your current portfolio or if the 10x stock is an anomaly.
To ensure proper diversification, it is generally recommended to allocate a maximum of 2.5% to 5% of your portfolio in each stock, unless you have a strong conviction about a particular stock's potential.
In addition to diversification, you can also use future potential savings as a rebalancing tool. For example, if your projected savings over the next 3 years are equal to the current value of your portfolio, you can easily rebalance by allocating more funds to stocks that have a lower allocation in your portfolio.
Remember, portfolio management is a dynamic process that requires regular monitoring and adjustments. It's advisable to review your portfolio periodically and consider rebalancing on a quarterly or yearly basis, depending on changes in the market, your investment goals, and personal circumstances.
Please note that the information provided is general in nature, and it's always recommended to consult with a financial advisor or investment professional who can assess your specific situation and provide personalized advice.
So detailed answer. Thanks a lot sir.