Portfolio Manager: a must-have tool for investors
The last week was a one way week. One way upwards! Yes, the stock markets pretty much kept going up, all week long. To give you an idea of how the markets have been doing, lets do a quick review of the stocks that we discussed as sample stocks, a couple of weeks back:
Information presented is no. / stock / price on 24th Oct / price on 5th Nov / Gain-Loss%
1. BHEL / 630 / 633 / 0%
2. Bharat Electronics / 538 / 568 / 6%
3. Infosys / 1780 / 1977 / 11%
4. Wipro / 641 / 688 / 7%
5. Aventis / 849 / 1041 / 23%
6. Cipla / 275 / 274 / 0%
7. Bharat Forge / 822 / 869 / 6%
8. MICO / 1735 / 1847 / 6%
9. Gujarat Ambuja / 359 / 346 / (-4%)
10. Madras Cements / 879 / 869 / (-1%)
Its a mixed bag, as you can see. Of course do note that its just been a couple of weeks, and its really too early to make any judgement calls on any of these.
Having seen that, we come to the main topic of the week, viz. a portfolio manager. No, I repeat that I am not referring to that fellow in a suit at your bank, who would like to manage your portfolio for you. I am referring to a software tool, preferably based on an Internet site, that can keep track of the stocks that you wish to track. While there are several sites that offer such a tool, I use the one that is available at www.equitymaster.com.
Using a porfolio manager demands a certain discipline, but the utility of the same is immense. How do you use a portfolio manager? Well, I will tell you how I use it.
I set up at least two different 'portfolios' on the portfolio manager. Lets call these as Portfolio Own and Portfolio Track. As the names suggest, these are respectively, a portfolio to keep a track of stocks that I actually own, and another to keep track of stocks that I am just tracking, but not actually owning.
As soon as a stock becomes of interest to me, I add it as a 'purchase' on the Portfolio Track. Note that I have not actually purchased it. When I do such an addition, I put in the date of purchase (which is the date from which I am starting to track it) and the purchase price (price at which I am starting to track it). At that point, I know that the stock is of interest to me, but I am not sure if its the right time to buy it (remember the earlier pieces about waiting for a buying
opportunity, and also about the cyclical nature of stock prices).
Since I do not own this stock, the purpose of tracking it is that I would like to purchase it, provided I get a good price for it, or in other words, if it goes low enough in its price. So most times, a stock in Portfolio Track is monitored for a dip in its price. If it goes low enough, I may like to actually purchase it. The exceptions are those cases, where the stock keeps rising unabated and one can then view its graph and characteristics, to see if there is a likelihood for further
increase, in which case, one can still buy it, inspite of it not dipping down.
What the portfolio manager shows you is the original purchase price and date, and the current price, whenever you are viewing it. There is an immediate link to view the company details and its graph, from that same location, So its indeed a perfect place to keep track of your investments and your potential investments.
Having mentioned about the Portfolio Track, there is still the other portfolio that I manage, which is the Portfolio Own. When I actually purchase a stock, I take it out of the Portfolio Track and transfer it to Portfolio Own. Here I put the actual purchase date and price. Now, remember here is where you have actually put your money. Ideally you want to now wait for the selling opportunity when you make your target profits. However note that sometimes the reverse movement can also happen. The stock could start sliding down, after you have purchased. So once you have actually put your money on the stock, you need to monitor its movement upwards or downwards. You may decide for example, that your target is 20% on the positive side, and on the negative side, you are willing to lose upto 10% but no more than that. Then you will track the stock both ways. If it moves up 20% (and for your benefit, the portfolio manager, in addition to showing the purchase and current prices, also shows the percentage gain or loss, for immediate view; no need to sit with calculators in hand!), you may like to sell off and book your target profits, and if it goes negative upto 10%, you may still want to sell the stock, and cut your losses.
The trouble in most cases, is that when a stock goes up and reaches one's target profit level, one may get greedy and not sell.
Likewise, when the stock starts sliding down, inspite of seeing that one's capital is getting drained off, one still keeps holding the stock, hoping that the stock will come up!
Both of these are the biggest problems for retail amateur investors, and have everything to do with maintaining a discipline in your investments. Next week, we will talk about this in detail.
For now, coming back to the portfolio manager, as mentioned above, you keep track of your Portfolio Own and Portfolio Track, as described above.
Usually when you have a good stock in hand, it is likely that you may get multiple buying and selling opportunities in the same stock, over time. Lets say, I start tracking HDFC at a time, when its at 620. I see it move up to 690, but do not purchase it. Then, it starts coming down. I recognise from its graph that on a broad base, its still headed upwards, so the temporary movement downwards, represents the ideal buying opportunity. I manage to purchase the stock at 650, say. At this time, I move the stock from Portfolio Track to Portfolio Own. At some point, the stock starts going up again, and reaches 685. Having seen an earlier high of 690, suppose I believe that its a good point to exit the stock, having made a profit of 35 on the share. After recording the sale of the stock, I move it AGAIN to my Portfolio Track.
Now, the share may actually keep rising this time, and go upto say, 710. Thereafter it starts coming down again, as per the cyclical movement. This time, if it comes down to a level of say, 670, I may consider it as a worthwhile buying opportunity. And the stock moves back from Portfolio Track to Portfolio Own.
This sequence is mentioned just to give you an idea about the cyclical movement once again, and the fact that the Portfolios that you set up can be used to keep tracking good stocks, for multiple rounds of buying and selling.
Another very useful feature that is available with a Portfolio Manager is the feature of setting up low and high alerts. Which means that if you are not keen to connect to the Internet and see your portfolio each day, you can still get warned about sudden dips or sharp gains, on your stocks, over email or even on SMS. This requires you to set a low alert value and a high alert value for all the stocks in your portfolio, and which you can typically set to your 'stop loss' and 'target profit' levels. Once that is done, the email or SMS alerts are automatic.
The Portfolio Manager has many other value added features in addition to what I have discussed above. Typically the Portfolio Manager will allow you to track your mutual funds also, in a separate area. So it can become your one stop for investment monitoring.
Next week, we will discuss the very important subject of maintaining discipline in your investments. Till then, let me leave you with an interesting graph - and you decide if you wish to put it in your buying list or tracking list or what?!
Till next week, au revoir..
- Sanjay Mehta
Information presented is no. / stock / price on 24th Oct / price on 5th Nov / Gain-Loss%
1. BHEL / 630 / 633 / 0%
2. Bharat Electronics / 538 / 568 / 6%
3. Infosys / 1780 / 1977 / 11%
4. Wipro / 641 / 688 / 7%
5. Aventis / 849 / 1041 / 23%
6. Cipla / 275 / 274 / 0%
7. Bharat Forge / 822 / 869 / 6%
8. MICO / 1735 / 1847 / 6%
9. Gujarat Ambuja / 359 / 346 / (-4%)
10. Madras Cements / 879 / 869 / (-1%)
Its a mixed bag, as you can see. Of course do note that its just been a couple of weeks, and its really too early to make any judgement calls on any of these.
Having seen that, we come to the main topic of the week, viz. a portfolio manager. No, I repeat that I am not referring to that fellow in a suit at your bank, who would like to manage your portfolio for you. I am referring to a software tool, preferably based on an Internet site, that can keep track of the stocks that you wish to track. While there are several sites that offer such a tool, I use the one that is available at www.equitymaster.com.
Using a porfolio manager demands a certain discipline, but the utility of the same is immense. How do you use a portfolio manager? Well, I will tell you how I use it.
I set up at least two different 'portfolios' on the portfolio manager. Lets call these as Portfolio Own and Portfolio Track. As the names suggest, these are respectively, a portfolio to keep a track of stocks that I actually own, and another to keep track of stocks that I am just tracking, but not actually owning.
As soon as a stock becomes of interest to me, I add it as a 'purchase' on the Portfolio Track. Note that I have not actually purchased it. When I do such an addition, I put in the date of purchase (which is the date from which I am starting to track it) and the purchase price (price at which I am starting to track it). At that point, I know that the stock is of interest to me, but I am not sure if its the right time to buy it (remember the earlier pieces about waiting for a buying
opportunity, and also about the cyclical nature of stock prices).
Since I do not own this stock, the purpose of tracking it is that I would like to purchase it, provided I get a good price for it, or in other words, if it goes low enough in its price. So most times, a stock in Portfolio Track is monitored for a dip in its price. If it goes low enough, I may like to actually purchase it. The exceptions are those cases, where the stock keeps rising unabated and one can then view its graph and characteristics, to see if there is a likelihood for further
increase, in which case, one can still buy it, inspite of it not dipping down.
What the portfolio manager shows you is the original purchase price and date, and the current price, whenever you are viewing it. There is an immediate link to view the company details and its graph, from that same location, So its indeed a perfect place to keep track of your investments and your potential investments.
Having mentioned about the Portfolio Track, there is still the other portfolio that I manage, which is the Portfolio Own. When I actually purchase a stock, I take it out of the Portfolio Track and transfer it to Portfolio Own. Here I put the actual purchase date and price. Now, remember here is where you have actually put your money. Ideally you want to now wait for the selling opportunity when you make your target profits. However note that sometimes the reverse movement can also happen. The stock could start sliding down, after you have purchased. So once you have actually put your money on the stock, you need to monitor its movement upwards or downwards. You may decide for example, that your target is 20% on the positive side, and on the negative side, you are willing to lose upto 10% but no more than that. Then you will track the stock both ways. If it moves up 20% (and for your benefit, the portfolio manager, in addition to showing the purchase and current prices, also shows the percentage gain or loss, for immediate view; no need to sit with calculators in hand!), you may like to sell off and book your target profits, and if it goes negative upto 10%, you may still want to sell the stock, and cut your losses.
The trouble in most cases, is that when a stock goes up and reaches one's target profit level, one may get greedy and not sell.
Likewise, when the stock starts sliding down, inspite of seeing that one's capital is getting drained off, one still keeps holding the stock, hoping that the stock will come up!
Both of these are the biggest problems for retail amateur investors, and have everything to do with maintaining a discipline in your investments. Next week, we will talk about this in detail.
For now, coming back to the portfolio manager, as mentioned above, you keep track of your Portfolio Own and Portfolio Track, as described above.
Usually when you have a good stock in hand, it is likely that you may get multiple buying and selling opportunities in the same stock, over time. Lets say, I start tracking HDFC at a time, when its at 620. I see it move up to 690, but do not purchase it. Then, it starts coming down. I recognise from its graph that on a broad base, its still headed upwards, so the temporary movement downwards, represents the ideal buying opportunity. I manage to purchase the stock at 650, say. At this time, I move the stock from Portfolio Track to Portfolio Own. At some point, the stock starts going up again, and reaches 685. Having seen an earlier high of 690, suppose I believe that its a good point to exit the stock, having made a profit of 35 on the share. After recording the sale of the stock, I move it AGAIN to my Portfolio Track.
Now, the share may actually keep rising this time, and go upto say, 710. Thereafter it starts coming down again, as per the cyclical movement. This time, if it comes down to a level of say, 670, I may consider it as a worthwhile buying opportunity. And the stock moves back from Portfolio Track to Portfolio Own.
This sequence is mentioned just to give you an idea about the cyclical movement once again, and the fact that the Portfolios that you set up can be used to keep tracking good stocks, for multiple rounds of buying and selling.
Another very useful feature that is available with a Portfolio Manager is the feature of setting up low and high alerts. Which means that if you are not keen to connect to the Internet and see your portfolio each day, you can still get warned about sudden dips or sharp gains, on your stocks, over email or even on SMS. This requires you to set a low alert value and a high alert value for all the stocks in your portfolio, and which you can typically set to your 'stop loss' and 'target profit' levels. Once that is done, the email or SMS alerts are automatic.
The Portfolio Manager has many other value added features in addition to what I have discussed above. Typically the Portfolio Manager will allow you to track your mutual funds also, in a separate area. So it can become your one stop for investment monitoring.
Next week, we will discuss the very important subject of maintaining discipline in your investments. Till then, let me leave you with an interesting graph - and you decide if you wish to put it in your buying list or tracking list or what?!
Till next week, au revoir..
- Sanjay Mehta
posted by SPM at 8:53 PM. Permanent link to this post.
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