An expert in selection of Equity

Do you think you are an expert in selection of equity shares? Do you have time to track your portfolio of Equity Shares purchased. Is the number of equity shares in your portfolio only increasing and you are not able to cash out? Then why did you purchase equity shares of many companies.

If you do not have time and expertise, then you should leave the decision making of when to buy and sell equity share to experts. Yes, we would all like to buy an equity share and hope it doubles or triples in 2 or 3 years, but it does not always happen. You have to keep studying the company’s financial statements and then take a decision.

We usually buy based on tips and reviews given by experts. But if the tips have been given by experts, the time taken for the tips and reviews to reach ordinary mortals like us would be a day or two and in that time the price would have gone up. But if you still believe then wait for a dip and purchase.

The ability of a person to track his / her holding is around 20 equity shares. This is assuming he puts in enough time to read and study his/her equity shares. Even when you keep track, you should know your long term goal and your risk appetite. Since the market keeps going up and down on a daily basis. Sometimes it falls for 3 to 5 days in a row.

And if such a thing happens your portfolio will fall. But if you look closely some equity shares would have fallen more than the others or some might have actually rising. This can happen only if you have had diversification of equity shares from different sectors. So the key to a good portfolio is diversification.

A good investor selects some shares which s/he buys as a security deposit. These shares s/he will rarely trade in. These shares s/he has great hopes in and would like to keep adding as and when s/he gets an opportunity. Of course s/he might have other shares which are meant for profit making (sometimes loss making).

However good you might be never put more than 20% of your equity investments in one company. Too much exposure to one company is very risky, profits might be good, but in case of loss that too would be good. Sometimes there are special occasion’s viz. buyback, dividends, bonus etc.

In such cases one should check the risks and then take a decision. In any case do not touch your security deposit. As we had discussed earlier do you have equity shares which you had purchased in the hope of making quick profits and still holding them and you feel if was a wrong decision, sell.

Yes, you would have made a loss, but your money is not locked and you can use it to make some money or another mistake. But holding on to such shares would only erode your capital. If you had purchased an equity share for the short term and set a target, sell it on reaching the target.

Paper profits would only increase your portfolio in the short term. If you feel you want to keep it move it to your security deposit.