When it comes to investing; picking the right stocks to buy is only
the start of your job. Then you must manage your investments. That
includes tracking each of your stock’s performance, watching for
sell signals, and rebalancing your portfolio when conditions
warrant. Here’ how.
Monitor Your Portfolio
Periodically check your holdings to see if anything has changed
that might require action on your part. Check weekly if you own
mostly small fast-growing stocks. Checking monthly is sufficient if
you hold large well-established stocks such as Pfizer or Google.
Start by checking recent stock price action. Stocks move up and down
every day, often for no decipherable reason, so don’t overreact to
small price moves, say 5% or less. Also, most stocks move with the
overall market, so take market action into account when evaluating
your stocks. However, if your stocks do make a big move, up or down,
action may be required on your part.
If one or more of your stocks have moved up substantially, say by
25% or more, it may be time to rebalance your portfolio. Conversely,
if the market has been steady or uptrending, but your stocks have
dropped by 15% or more, check for news that might affect your
stock’s fundamental outlook.
Most online brokers provide portfolio trackers that show you how
much your stock’s share prices have moved since purchased. But they
may not include dividends when computing returns and they may not
track price action over specific periods, e.g. past four weeks,
year-to-date, etc. You need that information to effectively manage
your portfolio. Here are two of many sites that provide worthwhile
Morningstar’s Portfolio Manager (www.morningstar.com)
automatically adds dividends to share price moves when computing
total returns. It reports returns for a variety of fixed timeframes,
but not from the specific date that you purchased the stock.
Portfolio Tool does compute your total return, including
dividends, for each stock based on your purchase price, but doesn’t
list returns for other periods such as year-to-date, last 12-months,
The easiest way to follow the news on your stocks is to set up a
portfolio on FINVIZ (finviz.com).
Then, simply navigate to your portfolio on FINVIZ to see recent news
headlines affecting your stocks.
You can minimize risk by splitting your available cash evenly
among all stocks in your portfolio. That is, if you’re buying 10
stocks, put 10% of your cash into each, instead of overweighting the
stock that you think has the best prospects.
Over time, some of your picks will outperform and others will
falter, throwing your portfolio out of balance. So, periodically
rebalance your portfolio so that you again have equal dollar values
of each holding.
When to Sell
Sell stocks that you wouldn’t buy today if you were evaluating them
as new candidates. Sell signals include declining profit margins,
slowing revenue growth, disappointing earnings and weak price
charts. If you set a target price when you bought, sell when your
stock hits that price, even you think that it has more to run.
Monitoring your portfolios isn’t as daunting as it sounds. Once set
up, the process should take around 30 minutes.