Portfolio Management of Stocks

How to pick up a blue chip stock ?
Objective of Portfolio Management of Stocks is to Optimize yourreturn after proper risk management. You should carefully look around your daily life. You will notice what you use daily and what other people are using. This observation will give you fair amount knowledge to those products and companies.

Try to understand business model of those companies. Gather more knowledge on those companies. Understand company's balance sheet & Profit- loss statement. Look for Profitability in business; cash in hand, auditor's report, director report of the company.

to understand the business model of the company and management team. Check return on asset. Price/earning, return on equity and credit management of the company for last 5 years. Check analyst report on forward P/E.

If all these are satisfactory, invest in the company. Like these you need to find 6 to 9 companies from 5 sectors like Energy, Oil and Gas, FMCG, Service Sector, Biotech. Pharmaceutical, Bank, entertainment, Software Product and Insurance.

Portfolio Management for Blue Chip Stocks

Your investment philosophy is to own a small part of the company for at least 20 years. This ownership mentality will really give you money in the long run. In the high bull market do partial profit book regularly. If market sentiment is strong bull, use Future and options strategies.

If market sentiment is strong bear buy put option. Use 5% of your money in Future and Options trading. You should use Future and Option for portfolio management of your stock portfolio. Option trading basically used to hedge your asset and also make some speculative gain.
In strong bear market , your blue chip companies can generate good income if you use covered call option regularly. It's not difficult to get 40% p.a. ROI by writing Covered Call Option.

Do not do portfolio management based on voting machine

In short, the stock market is a voting machine and much of the time it is voting based on investors' fear or greed, not on their rational assessments of value. Stock prices can swing widely in the short-term but they eventually converge to their intrinsic value over the long-term.

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