Monday, 20 May 2013

MONEY MATTERS : STOCK PORTFOLIO CHECK UP (HOW DIVERSIFIED ARE YOU?)

We already know that diversification is putting your money in different baskets. How does this translate when picking the right stocks to buy? I suggest that you pick different industries that you want to get invested first. For newbies, 5 different stocks are ideal. Once you pick specific industries, narrow down which stocks you intend to buy. Case in point. If I want a utility company, will I pick PLDT (TEL), Meralco (MER) or Manila Water Corporation (MWC)? Do you yank all your money in one or divide them equally among these 3?


It's easy to get lost on how bullish Philippine Stock Market is today, that we sometimes fail to check how diversified are we. Remember that you have to HAVE A STRATEGY and stick to it. Simply put, you should know where you put your money into and when it hits your target price, you sell and realize your gains. "Risk comes from not knowing what you are doing." Warren Buffett quoted. Allow me to share with you my portfolio. I'm not saying that this is the ideal basket. In fact - I, myself, am "trying" my best to get the best of all worlds. 


Banks 37%, Holding Companies 25%, Utilities 18%, Land 12%, Commercial 5%, Consumer 3%. Total is 100%. Notice that a huge chunk of the pie belongs to bank. Whenever economy is good, banks cash in most of the gains since most money goes in and out from them. We're on good times now so it's worth considering. In fact, the highest gain on my portfolio comes from Metrobank (MBT). BDO is also catching up specially when they released their first quarter earning this year. Their income surpassed the expected return. Result? Uptrend on BDO's market price per share.
Holding companies give you an instant diversification since it's a parent of other companies belonging to different industries. For a light discussion, watch out for my upcoming post (SHOULD YOU BUY HOLDING COMPANIES?). Others are equally important as well. We seize the fact that people need water and electricity so we include MER for example on our basket, and so on. 

TIP: Check your basket of investment and add up all stocks belonging to the same industry. Check your percentages and assess if you're diversified enough. It's a high time to do this since you have the option to unload some stocks at a profit (given that the market is bullish). Stock market investing is an everyday learning experience. Have you given it a try? FYI: Minimum is only Php 5,000. -CMK.

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