In an ideal situation, portfolio management is one of the vital ingredients in becoming a successful investor.
Like some investment experts would say, portfolio management is all about strengths, weaknesses, opportunities and threats in the choice of investment and many other tradeoffs encountered in the attempt to maximise return at a given appetite for risk.
Whether you find your investments in a bull or bear market, the important message here is that portfolio management is important part of trading.
Record has shown that the stock market and the economy move in cycles that repeat over and over; therefore, understanding the different stages of the economy can help guide your investment decisions.
Market conditions come in two flavours: bull and bear. Each comes with its own set of tone. When you are in a bull market, it is characterised by optimism, investor confidence and expectations that strong results will continue; but when you are in a bear market, the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining.
The only way to manage the “bull and bear” market is to constantly think long-term by constantly making adjustments on your portfolio.
Hear what Aaron Levitt, an independent investment analyst said: “While investors shouldn’t completely change their long-term plans at the drop of a hat, making simple adjustments to a portfolio can help cushion losses or exaggerate gains. Even the smallest retail investor can benefit from making some tweaks to his or her portfolio allocations, depending on the market, and see results.”
Levitt believes that while investors shouldn’t feel compelled to change their portfolios radically in reaction to the market’s daily moves, small adjustments in the face of a bull or bear market could be a prudent move. “Adjustments to how the market perceives risk could save investors from catastrophic losses or help create exaggerated gains.”
“Investment success generally hinges on long-term thinking; however, most investors can’t help but worry about day-to-day shifts with their portfolios. Some of that worry is certainly justifiable given the recent increases in volatility over the last few years. Truth be told, both bull and bear markets are completely dissimilar animals and behave quite differently,” Levitt added.