26 August 2016

The Importance of Portfolio Balancing

Is portfolio balancing important?

Definitely yes!

Imagine that some of the stocks that you bought are over-valued and you still hang on to it without selling, guess what? After a few weeks or months, the market correct itself and the price came down and the size of your portfolio went back to square one again.

So what could be done better?

If you have followed my blog so far, you could use the "making use of market volatility approach" However, in stock investment, the most important question is to know the valuation of the company at the per share basic. Meaning that if the market cap of the company is worth so much, how much then the company would be worth per share? After you got the "intrinsic value" then you can sell the share when it goes over valued and buy in more when it becomes undervalued again.

Other way to do it is definitely to sell those over-valued shares that you are holding and buy into good/great companies that are over-valued.

Keep doing this, be patient and soon you will find that your portfolio will grow bigger.

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