Investing is about choosing fundamentally strong stocks and giving them enough time to generate wealth. Traditionally, the buy and hold methodology worked like a charm since most investors were blissfully unaware of the developments in the economy or the minor changes in the companies that they were invested in.
And so, if they had invested in good-quality stocks, then over the long-term, they managed to earn generous returns. However, the world has changed since and the internet has made ignorance obsolete.
Today, if you want to succeed as a stock investor, then monitoring your stock portfolio is as important as choosing the right stocks. This is more than installing the best stock portfolio tracker and analyzing the output.
But how exactly do you monitor your stock portfolio? Is it just tracking stock price movements? Or are there more angles to it? Let’s look at a more hands-on approach to monitoring your stock portfolio. Read On!
First things first, many investors assume that monitoring the portfolio means tracking the profits and/or the stock price movement. While this is a part of the overall monitoring process, there is much more to it than merely the current market price.
As a long-term stock investor, you should focus on the fundamental aspects of the company, its financial performance, and its operational and managerial strength.
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 cannot apply now.
You need to be constantly updated about how the company is performing, its credit rating, and any specific developments that can influence investor or buyer sentiment.
Also, scams and defaults! Satyam Computers (India), Enron (USA), etc. are testaments to the fact that some management teams will try to achieve success at the cost of the shareholders. Needless to say, monitoring stocks is a must.
Before I share 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.
This is usually a counterproductive strategy since constant tracking of stock prices can induce an emotional reaction deviating you from your long-term investment plan. This can also induce an urge to time the market to make quick profits.
The core idea behind monitoring stocks efficiently is keeping track of the company’s performance as opposed to the stock price movements. Here are some tips that can help answer the question – how to monitor your stock portfolio:
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.
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 analyze 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.
Also Read: How to Read and Understand Quarterly Reports
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.
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.
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.
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. For instance, Groww has a centralised dashboard where you can track the price movements of your stocks in real-time.
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.
Also Read: Why Do Stock Prices Change?
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 that they are invested in or visit the company’s premises for a better understanding of the way it functions.
There can be different ways of approaching this but the key lies in ensuring that you know where your money is invested and stay updated at all times. Remember, merely using a stock portfolio tracker is not enough! To be a successful stock investor, you must ensure that you monitor your stock portfolio comprehensively and regularly.