Good stock portfolio must select the right group
Have investors experienced that luck was not on your side. When buying stocks, prices do not move up. Moving slowly or worse, the price declines. When buying stocks, prices do not move up or moving slowly or the worse, the prices decline. While other stocks, the prices go up impressively and make a huge profit despite buying the same day and same time.
Do not condemn fate but should review the situation and find out what is the reason. One important factor that affects the investment is stocks selected in the port are inconsistent with the situation.
When choosing stocks in one business sector, but over time such as 1 month, 3 months, 6 months, etc. the stock price is not moving anywhere or may be down. Meanwhile, stocks prices in other business sectors speed up
As such, investors have two options, that is, continue hold the stock. But the question is, what is the overall return on investment in portfolio? Or alternatively, sell the stock and then buy stock in other business sector that has a better chance to make profit as a replacement.
Important factors that make a stock that has good fundamentals, but price is not moving up or moving up slowing, is an overview of the economy. For example,the economic outlook is bad, export problem, the baht is strong. (or weakening) quickly, and other factors such as political problems, war, trade, oil prices, etc.
For example, if the world economy is sluggish. As a result, the export sector of the country continued to shrink. Therefore, the listed companies with export revenues are mainly affected. As a result, revenue is not growing and is likely to decline. Contrary to crude oil prices in the world market is likely to increase. This is good for the energy sector.
In the case above, investors with export stock in portfolio if keep on may have negative effects on the overall portfolio. It should be sold and then buy energy stock instead.
Such an approach is called portfolio revaluation based on Sector Rotation. In most cases, this investment strategy is based on a top-down approach. Start from analysis of the economic picture of the world, country, industry and the company status, respectively.
When analyzing the economy in that period then find out what kind of business would be most beneficial. Because each type of business will generate sales and earnings differently in each economic cycle. For instance, the price of agricultural products will be good when the economy grows that allowed people spend a lot of money. Or travel business will shrink if political problems arise. Or luxuries such as mobile and technology equipment will not sell well during the recession because people will buy only things that necessary for living.
So, if the environment is changing. Investors can change the business category to suit the situation. For efficiency and increased opportunity to generate more returns.
For the economic cycle can be divided into 4 cycles
1. Economic downturn(Trough) It is a period of negative economic growth and famine. Products cannot be sold at all. The company's operating loss, no new jobs opening, unemployed people, low interest rates and low inflation.
If interest on investing in stock, it is a difficult time. It is full of negative factors. Therefore, analysts are advised to reduce stock portfolios. However, stocks that can still be invested in this period include Blue Chip Stock. It is a big business stock market leader with strong fundamentals, financial stability. high cash flow and low debt. And if it can pay dividends is even better. In addition, the business that related to goods that people must consume, whether the economy is flourishing or down. It is interesting, such as food businesses, hospitals, businesses related to various utilities.
2. Economic recovery (Recovery) The economic recovery begins after the depression. It is noteworthy that the economic numbers have increased. Products are available for sale. Price starts to rise. The company's performance improved. Start with higher employment. People have better income. Consumer confidence shifts. Banks started lending more. Investment in this period is considered the most appropriate because during the economic recession stocks prices have fallen. And when the economic signals start to improve, the stock price will start to rise as well. So, it is a gradual buy period. The focus is on stocks with strong fundamentals and benefit from the economy in this period, such as energy, consumer goods.
3. Peak Economy (Peak) The economy is fully grown. Interest rates and inflation are high. Also, high production, hiring mature, high income. Thus, people are spending more. The price of goods and services is very high. The most active stocks in this cycle are commercial banks. financial Institutions, retail technology and consumer products
4. Recession economy (Recession) It is a period that occurs after the economy is booming. In this period, economic growth will be slowing down. Interest rates are starting to decline. Company earnings began to shrink. Production and employment are not good. Public income and consumer confidence began to decline.
The stocks that have benefited from this cycle are stocks that are not affected by the economic cycle, whether the economy is depressed or booming. Products are also essential to people such as food, hospital, utilities such as electricity.
Stock selection in line with the economic cycle is another strategy of investment that investors need to understand the economy precisely in what kind of economic conditions. Because the success of the investment must choose the right stock at the right time and buy at a reasonable price.