Risk Control While Building a Portfolio - How to ensure that your money is safe in the stock market.
Vinit Bolinjkar
Stock Picker | 58% CAGR returns for last 3 years | Global Geo-Politics Watcher
Friends my first piece of advice to all investors is to consider risk while allocating money to stocks. Once you have decided on no. Of stocks and how much to allocate to it. Much of the game is done as far as risk of money is concerned.
2nd stage of risk management could be not to lose over 75% of your value invested. Or any no. You are comfortable with.
So let's say you allocate 3% to a stock and let us say you will never let it fall more than 75% that means your risk to the stock is only 2.25%.
This allows your stock to breathe over the investment tenure and also controls exposre so that you do not lose all your capital.
Next comes not investing in risky companies. Will tell you more about this a little later.
Taking care of the outlook of the sector.
Considering the satge of bull market and business cycle of the co.
Betting on good management
Also buy a business which consistently earns higher return on capital employed than Weighted average cost of capital
And lastly not paying too high a price or reasonable valuation
If you take care of all these things. Trust me you don't need any further care in terms of risk management to monitor a stock. Once this is done just sit back and read and monitor performance of your stock twice quarterly.
Practicing Chartered Accountant | UAE VAT & Corporate Tax Specialist | Independent Consultant in Jaipur, India
5 年I have one question - How to judge about good management? How to judge that there is no hidden stressed assets in the financials of a company, bank or mutual fund?? How come stock price of a company or bank suddenly go down 30% or even more in a single day.. It either means (a) some accident has happened or if not, (b) past financial reporting was not transparent. or (c) financial reporting of its debtors/ assets was not proper. etc... How come, suddenly, big write-off appeared in the books of so many companies. Management and/or auditors must be knowing but avoiding provisions..??