FINANCIAL CHRONICLE™
Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
FINANCIAL CHRONICLE™️
www.srilankachronicle.com


Join the forum, it's quick and easy

FINANCIAL CHRONICLE™
Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
FINANCIAL CHRONICLE™️
www.srilankachronicle.com
FINANCIAL CHRONICLE™
Would you like to react to this message? Create an account in a few clicks or log in to continue.
FINANCIAL CHRONICLE™

Encyclopedia of Latest news, reviews, discussions and analysis of stock market and investment opportunities in Sri Lanka

Click Link to get instant AI answers to all business queries.
Click Link to find latest Economic Outlook of Sri Lanka
Click Link to view latest Research and Analysis of the key Sectors and Industries of Sri Lanka
Worried about Paying Taxes? Click Link to find answers to all your Tax related matters
Do you have a legal issues? Find instant answers to all Sri Lanka Legal queries. Click Link
Latest images

Latest topics

» Maharaja Foods PLC (MFL) ready for the Fall!
by ChooBoy Today at 12:27 am

» කොළඹ කොටස් වෙළඳපොල විශ්ලේෂණය - 2024
by ChooBoy Fri Jul 19, 2024 11:53 am

» Winds of Change: Sri Lanka's Banking Crisis is Stalling Renewable Energy Ambitions of Local Stalwarts of Wind & Solar Power
by God Father Wed Jul 17, 2024 10:11 pm

» Banking Sector Analysis
by God Father Sat Jul 13, 2024 7:57 am

» Impact of Elections on Colombo Stock Market Sentiment
by Quibit Tue Jul 09, 2024 9:01 am

» LankaBIZ Unveils AI-Driven On-Demand Financial Research and Analysis Service
by Quibit Thu Jul 04, 2024 12:49 pm

» CDB Non voting
by Nandun Sun Jun 30, 2024 9:45 pm

» The Parsi Power Play: How a Small Community of Iranian Parsis are Controling Sri Lanka's US $ 85 billion Economy & 22 Million Population & Politics driving away FDIs
by MalakaDesmond Sun Jun 30, 2024 10:19 am

» Richard Pieris Group: Mismanaged?
by Walbaba Sat Jun 29, 2024 7:04 pm

» සොෆ්ට්ලොජික් හෝල්ඩිංග්ස් පීඑල්සී: අඳුරු අපේක්ෂාවන් සහිත ඉහළ අවදානම් ආයෝජනයක්
by D.G.Dayaratne Tue Jun 25, 2024 5:45 am

» සොෆ්ට්ලොජික් ප්‍රාග්ධනයට වන්දි ගෙවන Share BuyBack නිසා Softlogic ජීවිත රක්‍ෂණය බංකොලොත් වීමේ අවදානමක
by MalakaDesmond Tue Jun 25, 2024 1:49 am

» Softlogic Life insurance face Danger of Bankruptcy due to Share BuyBack that compensate Softlogic Capital
by MalakaDesmond Tue Jun 25, 2024 1:33 am

» Softlogic Holdings PLC: A High-Risk Investment with Bleak Prospects
by MalakaDesmond Tue Jun 25, 2024 12:52 am

» FINANCE AND LEASING SECTOR
by SL-INVESTOR Sat Jun 22, 2024 12:48 am

» HSENID BUSINESS SOLUTIONS PLC (HBS.N0000)
by ErangaDS Wed Jun 19, 2024 9:21 pm

» How will proposed Tax Reforms affect Sri Lankans in 2025
by Quibit Wed Jun 19, 2024 9:27 am

» Falsified accounts and financial misrepresentation at Arpico Insurance PLC (AINS)
by ChooBoy Tue Jun 18, 2024 11:31 pm

» Impact of IMF reforms to Sri Lanka Economy
by D.G.Dayaratne Mon Jun 17, 2024 6:36 pm

» Richard Pieris Finance Ltd continue to endanger the Depositors with negative performance
by ddindika Mon Jun 17, 2024 3:17 pm

» Richard Pieris Exports reports 97% decline in Net Profits
by Biggy Sat Jun 15, 2024 11:26 am

» Do your own Stock Market Research using AI Tools
by Quibit Fri Jun 14, 2024 10:50 am

» What will happen tomorrow?
by cheetah Thu Jun 13, 2024 12:07 pm

» Focus on Government controlled entities
by ErangaDS Mon Jun 10, 2024 4:15 pm

LISTED COMPANIES

Submit Post
ශ්‍රී ලංකා මූල්‍ය වංශකථාව - සිංහල
Submit Post


CONATCT US


Send your suggestions and comments

* - required fields

Read FINANCIAL CHRONICLE™ Disclaimer



EXPERT CHRONICLE™

ECONOMIC CHRONICLE

GROSS DOMESTIC PRODUCT (GDP)



CHRONICLE™ YouTube


You are not connected. Please login or register

Read this if your stock-market results are disappointing.

Go to page : 1, 2  Next

Go down  Message [Page 1 of 2]

sriranga

sriranga
Co-Admin

Published in Investing on 19 August 2011 by Kevin Godbold

I'm reading a great book that is making me think about how I've been managing my share portfolio, even after several years of stock-market investing.
It's called "Selecting Shares That Perform" and was written by Richard Koch and Leo Gough, one a successful investor and the other a prolific author of financial and investment books.
Some of their rules for portfolio management challenge my previously held views, but I think they make sense. The following list starts with the rules that are rocking me the most:
1. Never 'average down' when the price is falling
They must be joking, right. Never average down; surely that flies in the face of conventional wisdom. Heck, I've averaged down on my investments loads of times, when they've moved against me.
But here's the thing -- although times of general market weakness may be a good time for bargain hunting, maybe there's a rational argument for not averaging down when an individual investment tanks. What we are talking about here are shares that fall despite being part of a rising index or portfolio. After all, we buy shares in companies because our analysis leads us to think that they will go up. If they go down, we were wrong, plain and simple.
Averaging down means we think a share is about to turn around and go up again, right? Well that's a tough call to make and one that's easy to get wrong. If you don't believe me, look at shares such as Royal Bank of Scotland (LSE: RBS), Lloyds Banking (LSE: LLOY) and Taylor Wimpey (LSE: TW), all popular 'value' favourites around 2007. Look at the share prices of these companies now and think of those investors that averaged down into the share-price destruction.
To me, it seems wise either to maintain our original weightings in such bad performing investments, or even to consider using the next rule:
2. Never be afraid to sell at a loss
Instead of averaging down, why not axe a falling share? I mean, it's doing the exact opposite to what it was 'supposed' to do, so why not just cut and run after a predetermined decline? The book I'm reading suggests 7-10%.
I wish I'd done that much more often. Shares such as Trinity Mirror (LSE: TNI), Dixons (LSE: DXNS) and HMV (LSE: HMV) could have been prevented from causing so much private-investor carnage if those punters had simply sold on share-price weakness.
3. Balance patience and prudence
Whether we fall into the 'long-term buy and hold' camp or the 'it's never wrong to take a profit' camp, it's a good idea to seek a balance between the two philosophies.
How patient should we be? If we are holding a share for years, and nothing happens, maybe it would be more prudent to sell and move on to other opportunities. Similarly, if a share rockets very quickly, maybe it's prudent to pocket some of those gains. My own rule-of-thumb is 'the faster the gain, the faster the sale.'
Generally, I think it's wise to be flexible and not become too entrenched in either philosophy.
4 Do not over-diversify your portfolio
Traditionally, a diversified portfolio of shares is seen as a defence against individual company risk, but too many shares in a portfolio can actually increase risk.
With too many shares, it's hard to know the underlying companies that well. There is a risk that the quality of your choices might decline and, with so many holdings, you could end up chucking in a few speculative punts with hardly any thought.
With greater focus on just a few shares, it's more likely that we will be on the ball when it comes to buying and selling. The book suggests that between five and ten shares is adequate for most investors.
5. Do not invest heavily when everyone else is
You've probably heard the adage: "When they are crying, it's time for buying; when they are yelling, it's time for selling."
In other words, when everyone has gone share crazy, there's a good chance that markets may be close to a cyclical high -- often a disastrous time to buy most shares.
Conversely, when markets have plummeted and shares are very unpopular due to recent investor losses, it is usually a good time to pick up cheap shares on depressed valuations.
6. Only invest if you are confident in the company's prospects
The book cautions: "Investing in the stock market is not like picking a winner at Aintree", and we can only be confident in a company's prospects if we have researched and analysed it thoroughly.
If we invest in speculative companies with no profits, but with great 'potential,' it is usually very similar to betting on the horses with an unpredictable outcome. On the other hand, finding attractively valued, profit-making businesses with good growth prospects can help us to achieve results that are more predictable.
Bottom Line
To me, these are sensible rules and I'm looking forward particularly to applying the first two more with my own share portfolio.
www.fool.co.uk



Last edited by sriranga on Fri Mar 09, 2012 9:30 pm; edited 1 time in total

http://sharemarket-srilanka.blogspot.co.uk/
Share this post on: reddit

sriranga: This is excellent advice for investors in this forum; thanks for sharing.

Good one. Thanks for sharing. One rep from me.

avatar

Post Mon Aug 22, 2011 7:30 pm by Neil Silva

Thanks!!!!!!! Good advise for beginners like me.

rijayasooriya

Post Mon Aug 22, 2011 8:39 pm by rijayasooriya

Looks like advices from well-experienced person.Thanks for sharing. Exclamation

Today is my first day. I really appreciate this. Cool

THKS FOR YOUR ADVICE ,I HAVE LOST SOME MONEY WHEN INVESTING FOR SHORT TERM GAIN MY EXPERIENCE IS NOT TO DO WHAT BROKERS (ADVICER) ARE SAYING BECAUSE I LOST BECAUSE I TRUSTED THEM MOST OF THE BROKERS ARE INEXPERIENCED ,

Good article, thanx.
I am happy to see that i have been following some of the above rules in my 1st year of investing Very Happy

Good article !!! Thanks for sharing Very Happy

hesara wrote:Today is my first day. I really appreciate this. Cool
Well come to this forum ! Laughing

Excellent advice!!

Thanks to all, for your kind appreciation. We'll work together to make this forum useful to everyone especially to our new comers.
God bless you.

avatar

Post Wed Sep 14, 2011 8:06 pm by Ajith Rajapakse

Sriranga,
Thank you very much for sharing excellent advice

thanx 4 share with us

Really good one mate......

avatar

Post Wed Sep 14, 2011 9:46 pm by chathura

I appreciate ur valuable idia.thanks a lot friend.


Thanks very useful post.

Excellent post mate! Thanks a lot for the share!!!!

Sriranga,

As an experienced person like U, sharing valuable ideas, is a asset to this forum.Tks.

Appriciate your knowledge sharing...

~ Gee Thanks a lot yes I too did that averaging mistake. We should average only at the right time otherwise it will end up with extra loss. If we cut off at the losing point by exiting, it will be less harmful than when U exit at a loss after averaging.

Thanks a lot for the valuable advice. For me I'm learning the lessons through the experience and valuable posts like this. but there may be few that does the same mistake again. I invite them to read these valuable posts and turn the losses into profits. ~

Really usefull post!Very Happy
Thanx bro.

whats wrong with averaging down a blue chip which is down with the index ( beta 1) ?

hirankb wrote:whats wrong with averaging down a blue chip which is down with the index ( beta 1) ?

I prefer to average by the following way, please read this link.
http://forum.srilankaequity.com/t6611-averaging-the-buy-price-to-minimize-risk-a-common-mistake-of-stock-traders#77319

rijayasooriya

Post Tue Oct 18, 2011 7:40 pm by rijayasooriya

hirankb wrote:whats wrong with averaging down a blue chip which is down with the index ( beta 1) ?
What I am going to tell below is easy to tell but difficult to follow.
Averaging,cutting losses and just holding are different strategies and all will work depend upon the condition or situation.Therefore u have to select the suitable stratergy for the current situation.

Mr Sriranga, You hit the nail of the head..... what the hell have I being thinking ...... this is a text book answer that almost everyone mis interpret.. Thanks for head slap.

by the way I see a head and shoulder top reversal pattern developed in ASI. Am i correct...?

Back to top  Message [Page 1 of 2]

Go to page : 1, 2  Next

Permissions in this forum:
You cannot reply to topics in this forum