2 Portfolio Management Strategies to Make Money Comfortably

A great method to step by step accumulate investment equity is by making a portfolio management system. It could actually enable you diversify your stocks and reduce investment risks.

We use SlashTraders’ official account for instance to share just a few of our favourite portfolio management strategies, to enable you generate consistent profits.

What Is Portfolio Management?

Portfolio management is a system that mixes multiple varieties of trading instruments or invests in many various sectors or industries directly. This reduces the chance of exposure to any concentrated underlying.

Regardless of which way the market goes, a diversified portfolio can reduce risks and turn into profitable in the long term.

Taking a look at SlashTraders’ official trading account, now we have a portfolio of around USD 40k in net liquidity. Most of our account liquidity is used for long-term investments.

Most of our account liquidity is used to purchase stocks for the long-term.

Once we find value stocks or high dividend-yielding blue-chip stocks, we’ll buy and hold them for a very long time.

Inside the USD 40k net liquidity, we use around USD 16k buying power to trade options to reap the benefits of short-term market fluctuations. Depending on different technical evaluation results we trade short Strangles in neutral-trending stocks, or sell Credit Spreads once we anticipate large volatility soon.

40% of the capital is utilized in trading options to reap the benefits of short-term market fluctuations.

You is perhaps focused on why now we have a ratio between stocks and options like this:

Stocks 2:1 options

Options trading has much greater risks than stock investing, as options have a closing date to show a profit when the contract expires, while a losing stock investment can patiently wait for the stock price to rebound.

So we limit the quantity of options trading to scale back the risks of our portfolio, while using the stocks for long-term growth.

What Is Asset Allocation?

Asset allocation is spreading the chance of the portfolio by splitting the investment capital across multiple different stocks. Even when one stock crashes, the entire portfolio shall not suffer so much.

Key Points to Asset Allocation

Other than buying value stocks with huge Upside potential and high-yield dividend stocks, our portfolio also invests in several Sectors, Industries and Countries.

Diversify our investment by purchasing stocks from different Sectors, Industries and Countries.

If any Industry, Sector or a single Country goes into recession, our overall portfolio shall remain profitable in the long term.

What Is Rebalancing?

Rebalancing is once we readjust the relative sizes of the stock positions after the stock prices have modified. The act of rebalancing normally results in:

  • Selling high-value positions.
  • Buying low-value positions.

How Rebalancing Works

The advantage of rebalancing is it helps us make systematic decisions on buying low and selling high. Thus reducing the emotional toll on trading.

At the following rebalancing cycle, we are able to:

  • Sell high market value positions like VOD, BACHY, and PNGAY.
  • Buy low market value positions like TCEHY and BABA.

Sell stocks from high Portfolio positions and buy stocks from low Portfolio positions to rebalance the portfolio.

The relative values of every position should reset to the unique setup after rebalancing, so the portfolio is not going to lean heavily towards any single stock, and diversify the risks.

Now you understand just a few basic portfolio management strategies, you’ll be able to study SlashTraders’ trading account to enable you diversify risks and systematically readjust your positions to comfortably accumulate wealth.

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