Top 10 Tips for Better Results in Portfolio Management Services

Here’s something important to remember when dealing with portfolio management services.  Every portfolio has a structure.  It may be a planned one with careful consideration given to creating a diverse mix of stocks, bonds, mutual funds, and various other securities; or it may be unplanned and may just have grown in certain directions as buys and sells were made over time.

Naturally, the wisest course is to have a plan, and to follow an investment style that fits in with your lifestyle; your goals, time horizon and risk tolerance.  Here are 10 tips which should provide you with better results in the management of your portfolio when dealing with portfolio management services:

1.  Own a strong dividend paying company in every market sector.

Dividends, and the potential for growth in a stock are near guarantees of profit.  You get paid quarterly, and you also get the potential of price appreciation over time.  Every sector in the market has financially strong companies with a history of paying and increasing dividends.  These companies often serve as core positions — owned for long periods of time as they have proved themselves to be stable dividend payers with regular (but likely not fantastic) growth. 

2.  Own a strong dividend paying company/security in every asset class.

Besides domestic stocks (U.S. equities), there are MLPs, REITs, emerging market ETFs, developed market ETFs, and mutual funds of essentially every type all paying dividends.  Owning a position in these additional areas not only serves to increase the diversification of a portfolio, but taps into the regular payment dividends with the possibility of long-term growth.  So include some of these in your investment management plan.

3.  Do not allow any single position to exceed 5% of your portfolio.

Position size is one way investors may choose to manipulate the market by over or under weighting a certain sector, industry or area of the market.  By overweighting one would hold a single large position in one stock in a sector, or a few significant positions in different companies occupying the same sector.

Excessive under weighting of a sector doesn’t cause problems — but being excessively over weight in any one position can lead to disaster.  

4.  Have and maintain a long-term time horizon — until you shorten it due to age/health (then move on to safer assets).

5.  Invest — do not trade often or attempt to time the market.

6.  Do not allow short-term fear or market volatility violate your investment plan.

7.  Trim some positions if they become too overvalued in relation to their historic PE ratios vs. what the S&P is trading for, or if they grow to too large a percentage in your portfolio — and add to such positions when the market moves to price them too cheaply.

8.  Know your risk tolerance.

The fact is that some of us have a higher tolerance for risk than some other people do.  Those who require constant safety and need to preserve their capital in order to feel at peace with their investment management should only get involved in investments with little or no risk.  People who can tolerate risk are usually more comfortable in equity — and are likely to have a mix of investments some risky, some not.  Know what your tolerance for risk is and invest accordingly.

9.  Keep only one or two ( if any) speculative positions and don’t allow the total of them to exceed 5% of your portfolio.

The risk of investing in a new, speculative company is high — just as the reward can be if the company happens to succeed.  But because the risk factor is so high, and loss can be so painful, it is best to limit speculative positions in a portfolio to one or two at the most.

10.  Keep some cash to take advantage of panic corrections that go too far taking all sectors and asset classes down at the same time.

When confronted with a buying opportunity, you don’t want to have to sell one position to take advantage of another.  By keeping some cash on hand it lets you to add to existing positions when the market makes them too cheap, or to add a new one when the right opportunity comes up.

Biography:  Jake Hyet is considered an expert in share portfolio management services and investment management system, having spent a decade working in the stock market.  He writes extensively on these topics.