February 25, 2024

The Power of the Portfolio: Building and Managing a Winning Trading Account

Have you ever registered for a trading account in India? Do you have a Demat account linked with the trading account? You will be ready to buy and sell financial securities in India by completing these steps. However, you still have to learn the secret to building a diverse portfolio and generating returns. Around 20 million people in India have online trading account with different stockbrokers. However, not every trader in India generates high returns. Choosing the best broker for trading is not the only thing required. Traders must know the power of portfolio management to generate high returns in our demat account. Let’s delve deeper to understand the power of portfolio management for building a successful investment career.

Are you familiar with the concept of portfolio management?

Portfolio management is a technique of managing one’s investments to achieve financial objectives. With the help of portfolio management, an organisation’s or individual’s portfolio is aligned with the investment strategy. The risks and constraints involved with the portfolio are taken into account. Portfolio management aims at eliminating risks and vulnerabilities that might hamper the portfolio return. Risk management, portfolio diversification, asset allocation, and many other processes fall under the umbrella of portfolio management. It also enables investors to take informed decisions and improve their portfolio performance. It involves data analytics, market research, performance monitoring, and other activities.

You cannot expect high returns without active portfolio management in this competitive era. Market conditions might change overnight, and you must adjust the portfolio accordingly. Investors should monitor economic changes, market disruptions, market movements, and other factors for successful portfolio management. Portfolio management is closely related to monitoring, as both are two sides of the same coin. Portfolio monitoring refers to monitoring investment performances and market conditions at all times. Based on portfolio monitoring results, investments are aligned to meet financial goals. Both are dynamic and ongoing processes required for generating high returns.

Best practices for portfolio management in 2023

Do you want to open demat account in the financial market? To do so, investors must follow the best portfolio management practices, which are:

Have a definite investment strategy

Having a well-defined investment strategy is a must to become a successful trader. Without a definite investment strategy, investments will be made aimlessly. There will not be a benchmark to measure the performance of investments. Based on the investment strategy, define clear investment objectives. Investors must define objectives that are achievable and realistic. Without an investment strategy, an investor will not know which type of securities/companies to invest in. Investment decisions will be random and open gates for financial risks.

Prioritise portfolio diversification

You can minimise risk across multiple financial assets with portfolio diversification. There is no need to have all investments within the same industry sector. Assume a trader that buys shares of only construction companies. The investor might lose revenue if there is a market disruption within the construction sector. Diversifying investments strategically across different assets, industry sectors, and geographies is essential.

Focus on portfolio monitoring

Without portfolio monitoring, you cannot implement portfolio management practices. Investors must monitor the performance of investments consistently. It will allow them to identify underperforming assets and take appropriate decisions. Investors can also identify areas for diversification and market disruptions with portfolio monitoring. When the asset performance is monitored, investors can ensure portfolio alignment.

Investors can choose portfolio monitoring solutions to identify market changes, underperforming assets, and more. New-age trading platforms are available, which allow you to get quick insights into portfolio performance. Investors can choose specific KPIs or metrics to track via a portfolio monitoring solution. Metrics are chosen according to the investment objectives. You can track metrics like ROI, portfolio beta, sharpe ratio, maximum drawdown, expense ratio, and tracking error.

Stay disciplined

Portfolio management is the key of having successful demat account and the high returns. You cannot create a successful trading account by making decisions based on emotions. Investors must make informed decisions backed by research and data analytics. Financial discipline is essential for running a successful trading account in India.

Rebalance portfolio when required

Sometimes, the asset allocation of your portfolio might deviate from the target. Consider the target allocation for an investor is 60% shares and 40% derivatives. With market movements, the asset allocation changes to 50% shares and 50% derivatives. The investor will rebalance its portfolio to match the target allocation in such a case. Again, portfolio rebalancing is possible when you focus on rigorous portfolio monitoring.

In a nutshell

Besides choosing the right stockbroker for trading, investors must adopt the right portfolio management strategies. Practices like portfolio diversification, rebalancing, and monitoring are essential for becoming a successful trader. You can rely on a new-age trading platform that offers research support for making informed decisions. The time to focus on portfolio management is now!

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