Many investors favour the buy low, sell high strategy which is what exactly value investing offers. It involves purchasing stocks that are undervalued and have the potential for future growth and earning profits when the price increases. The key concept behind this approach is to buy assets trading lower than their current market value to resell them at a higher price.
However, it’s not only about identifying or buying undervalued assets and waiting for their prices to rise. It is important to regularly monitor and adjust your portfolio to keep it profitable with less risk possible. This involves evaluating the changing market conditions, stock valuations, economic outlooks, political events, industry trends and responding accordingly. It can seem complicated at first but with strategic actions, you can maximise the potential of the value stocks in your portfolio.
Here are some useful and detailed tips on how to monitor and adjust your value portfolio over time.
- Perform regular stock evaluations
Evaluate the current market value of your value stocks and check if their price is still lower than their intrinsic value. Use stock evaluation tools such as price to earnings ratio and price to book ratio (P/E ratio and P/B ratio) to analyse your portfolio’s performance.
With these tools, you can make decisions on whether to buy more, sell, or hold a stock. This can help to maximise your returns with minimum risk and ensure that your portfolio remains profitable over time.
- Keep an eye on the fundamentals
Monitor the fundamentals of the companies you have invested in. Closely track metrics like earnings, revenue, and debt to equity ratios. When a company’s earnings and revenue increase, it generally results in increased stock prices. Thus, monitor these metrics frequently and make timely adjustments to your portfolio if necessary.
- Read reports and stay updated
Reading reports from trusted sources can provide valuable information on the latest developments, such as mergers or acquisitions, that may require you to adjust your strategy. Analyse and interpret the information provided. This involves researching industry trends, tracking company performance, financial statements, and consulting with financial advisors.
Also assess factors like dividend announcements, bonus announcements, splits, management changes and key business information. This will help you take quick action when necessary, such as if you should hold the value fund or sell it to invest in other securities.
- Keep a tab on your portfolio correlations
As you start building your portfolio, you add stocks and securities with low or negative correlation to spread out the risk and avoid any concentration risk. However, market volatility can impact the correlations in your portfolio.
By regularly monitoring your portfolio correlations, you can adjust your stock selections as needed to maintain a healthy level of diversification and reduce your overall risk. This helps you ensure that your portfolio is working together to achieve your mutual fund investment goals.
Ending note
To get the best value out of your value stocks, closely monitor and adjust your portfolio by using the above strategies. Besides, also learn from your past investments, watch out for warning signals, and optimise your portfolio with the help of online tools.
Regular revaluation of your value portfolio can lead to better decision-making, more profitable returns, and efficient risk management. The key is to remain flexible and adaptable to changes, never assuming that your current portfolio will remain profitable all the time.