How to Manage Your Own Stock Portfolio

Reviewed and Updated by Gabe Ross on December 20, 2023

Managing your own investment portfolio puts you in control of your finances. If you are just beginning your investing journey, you may not be sure how to start managing your investment account. You might even be wondering if managing your own stock portfolio is a good idea.

This article will explore how to manage a personal stock portfolio, the benefits of taking charge of your investment account, and different strategies that can help you to maximize your profits.

What Is Portfolio Management?

A portfolio is a collection of stocks, bonds, and other investments. Some investors may own only a few dozen stocks, while others may have thousands of stocks in their portfolio.

Portfolio management is how you implement investment strategies. It involves deciding on which assets to purchase or sell, and how to best time those transactions.

The portfolio management task also involves deciding how to allocate assets in the portfolio. There are thousands of stocks, bonds, and other assets from a diverse range of industries and sectors to choose from. To increase your chances of investment success, you should strive to build a sector-balanced portfolio.

You can manage your investment account on your own or hire a professional to handle the task for you. There are also automated portfolio management services, or robo-advisors, in industry parlance.

Whether you take control of your portfolio or let someone do it for you, the task will be guided by your financial goals, investment timeline, and risk profile.

Should You Manage Your Own Stock Portfolio?

Whether you end up with a profit or a loss from an investment will depend on a number of different factors, including the decisions you make when managing your portfolio. As a result, the decision to manage your own investment account or leave the task to a professional requires careful consideration.

Managing a portfolio starts with constructing it. For many investors, the greatest challenge comes with deciding the right stocks to buy. You need to research your options carefully to select the best stocks that align with your investment goals and risk appetite.

If you are not comfortable making these decisions on your own, consider consulting with an investment professional. While hiring a professional to run your investment account will cost you money, it can also bring you peace of mind and potentially shield you from costly mistakes.

Although choosing the right stocks to buy can be a daunting task, TipRanks has created powerful stock screening tools and insights to assist you.

Managing your portfolio on your own will keep you in control of your investments. It can also save you money by avoiding management fees and other costs that come with hiring a professional to run your investment account. You will also begin to gain experience and knowledge over time, helping you to more confidently navigate markets and investments.

How to Manage Your Stock Portfolio Like a Pro

Taking charge of your portfolio will give you a chance to learn from the best, such as the visionary investor Warren Buffett. The following are a number of important strategies that can help you construct a portfolio that can return profits consistently.

Set Your Financial Goals and Stick to the Plan

Establishing investing goals and timeframes is essential, and it will inform both the stocks to buy and how long you intend to hold onto them.

Investors have varying financial goals and timelines. For example, someone investing to fund their retirement in 30 years will likely choose a different strategy than someone investing to save for a down payment on a house in the coming year or two.

Stock prices fluctuate, and that might make you feel anxious. Instead, once you have decided on your investment objectives and set up your portfolio accordingly, it is best to remain patient and stick with your investments. Frequently revising your plan due to market volatility can make a bad situation worse, and could even cause you to miss out on future earnings when prices rebound.

Diversify – Make Sure to Spread Out Risk and Reward

The rule of portfolio diversity is that you should try to invest in stocks with different characteristics. You can diversify your portfolio in a number of ways. For example, you can spread your investments across multiple stock sectors, sizes, and geographies.

For instance, you can diversify your holdings by investing in a mix of domestic and foreign stocks. Or, you could invest in companies of different sizes, building a portfolio that consists of a mix of micro-cap, small-cap, and large-cap stocks.

A diversified portfolio can prevent all your investments from sinking if one company, industry, or geography hits a rough patch.

Apply Dollar-Cost Averaging Strategy

Those who follow a strategy of dollar-cost averaging will invest a set amount of money regularly, regardless of the market condition. There are number of benefits from following this strategy.

For starters, dollar-cost averaging will automatically force you to devote money towards building your investment portfolio at regular intervals. This guarantees that a portion of your regular income will be dedicated to actively investing.

Another benefit from dollar-cost averaging is that you will avoid the danger of pouring your monies into the market at inopportune times. Though historically the stock market has generated wealth in the aggregate, investing in the stock market is not without risk. There are certain periods when the market will drop (sometimes precipitously), and you can lose enormous value if you invest all of your monies just before one of these downturns.

Dollar-cost averaging addresses this risk: you will buy at times that are optimal as well as during times that are not. No matter what, you will continue to buy, and on average your gains will cancel out your losses. Over time, as the market climbs upwards, your growing portfolio will continue to expand and gain value.

Reinvest Those Dividends – They Will Be Worth More in the Future

Not every stock pays dividends. If you have dividend earners in your portfolio, you are generally better off reinvesting the dividends than withdrawing the cash. Some companies allow you to do this automatically through a Dividend Reinvestment Plan, also known as DRIP.

Dividend reinvesting is a smart way to leverage the power of compound interest. The dividends you reinvest now will earn more dividends in the future, which will in turn expand your portfolio. TipRanks provides tools to help you screen for high-yielding dividend stocks quickly and easily.

A Long Timeline Works Well – Go For It

Although the stock market can be volatile, stocks have historically delivered profits over the long-term. With a long timeline, your portfolio will have the time to recover from market downturns.

A long investment timeline also comes with a tax advantage. The IRS taxes long-term capital gains at a lower rate than short-term gains. A long-term capital gain is the profit you make after more than a year of investing.

Rebalance the Portfolio – Periodically Review Your Investment Strategy

While reacting to every short-term market fluctuation is generally not advisable, periodically reviewing and rebalancing your portfolio is a good idea.

Market movements can upset the balance of your portfolio, especially from the diversity angle. As a result, the setup of your portfolio can deviate from your financial goals over time. A periodic review of the account allows you to bring it back on track.

In addition, your needs and objectives might change over time. What started as a short-term investment project might have turned into a long-term commitment.

Taking the time to periodically review your portfolio and your goals can help make sure that the two are aligned and compatible.