How to balance your stock portfolio Pt 2

© John Efetobor. All Rights Reserved

Balancing your stock portfolio to me is an interesting game. When you consider and understand the dynamics involved you will appreciate that it is not one of the easiest of chores. There are different shades of opinions and suggestions as to the best strategies to adopt when it comes to balancing your stock portfolio, the intention of this article is not to take side or disagree with any camp but as the theme of the article suggests; to show you practicable, workable and objective tactics you can employ to balance your stock portfolio.

For your stock portfolio to be balance, there are very vital points you have to take into consideration; points in my opinion that really ensures that your balance is balanced.

The first is the dynamics of the human emotion of greed and fear: If you are an objective and realistic investor, you cannot discountenance this powerful influence in the art of balancing your stock portfolio. A swing in either of these emotions can tilt the balance of your stock portfolio. Talking about greed and fear; there are some factors that influence over these emotions you might be employing in your stock decisions.

One of them is the age profile of investors. The way an investor whose age range falls into say 20-45 years will behave, think, react, decide about portfolio choices will be different from an investor whose age bracket falls into 46-64 bracket ditto for an investor whose range bracket falls into say 65 years and above.

Let’s look at their different behaviors when it comes to balancing their stock portfolios:

20-45 years bracket

They are risk tolerant; they are not averse to risk. There are very adventurous in their mindset; they view risky stocks as opportunity for profits. They are given to amassing stock information that is why you will find them at seminars, they buy stock books more, and they have more presence in the internet. Suffice to say they are more voracious or do I say greedier.

46-64 years bracket

They are risk intolerant; they are very critical of opportunities that make themselves available at the capital market, sometimes for good reasons. Investors in this range bracket most times like to sit on the fence; why the 20-45 age bracket are very offensive in their approach to stock balancing, 46-64 age bracket are defensive in their mindset, speed and choices.

65 years and above

Investors in this range bracket depend more on experience to aid them in their approach to balancing their stock portfolio. They are passive and completely averse to risk. I know investors in this bracket who see investing in small cap companies as a death trap; they would rather spread their portfolios around fixed investments (bonds), large cap companies that holds the assurance of dividends and bonus scrip for them.

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