If shares perform well, don\u2019t be afraid to take some profits, said Blount.<\/p>\n “If the share continues to do well, you still have some in your portfolio, but if its fortunes do decline, at least you have taken some money off the table. No share can outperform the market indefinitely and even the greatest companies will eventually give market-like returns.”<\/p>\n Most investors like to look for new ideas in their portfolios and they typically don\u2019t like to sell shares because they reason that either it has done well so don\u2019t sell it, or it has performed poorly so don\u2019t sell as it might bounce, noted Blount.<\/p>\n “Hence, over time, the portfolios get more and more names in them, with smaller and smaller weights. This is called a \u201cLong Tail\u201d.<\/p>\n “You want to avoid long tails.”<\/p>\n To avoid these long tails, Blount recommended that you look at the\u00a0holdings that make up small fractions of your portfolios, for example 0.2%. This is because even if these shares double in price, they won\u2019t make a material impact on the portfolio\u2019s performance, meaning you should either sell or take them up to a material weight in the portfolio (at least 2%).<\/p>\n “If the original motivation for buying the share is intact, and it\u2019s near term sentiment that has pushed the price down, then top up. If, however, the price has fallen because the original motivation to buy the share has gone, then sell,” he said.<\/p>\n “Most investors often have a strong bias to large cap, blue chip shares,” said Blount.<\/p>\n However while they give security, over time, mid cap and smaller companies often outperform large companies so it is vital to ensure you have a few good quality mid and small companies in your portfolio that have attractive growth prospects.<\/p>\n The reason for a diversified portfolio, with several different shares, is to diversify one\u2019s risk: if one share blows up, it won\u2019t sink the whole portfolio. However, make sure that there is not a single common theme or driver of the portfolio, said Blount.<\/p>\n “Common themes to watch out for are a weak rand view (favours rand hedge stocks), consumer stocks (very popular until recently), resource shares, banks and financial stocks, Africa-facing companies, property and so on.”<\/p>\n “This is not to say you shouldn\u2019t take a view on a theme and build a portfolio around it, but just be aware of the risks if a theme dominates the stock selection. A high quality portfolio is one that owns many shares that have different drivers, rather than a single-factor driver.”<\/p>\n “Don\u2019t ignore correspondence that your stockbroker sends you,” warned Blount.<\/p>\n “Sell rights issues or use them to buy more stocks. Understand the impact of mergers or other corporate activity, or taking scrip dividends or cash. Whenever you get some correspondence about a share that you own, call your broker and ask them for an opinion on what to do.”<\/p>\n “They are paid to help you with this.”<\/p>\n <\/p>\n “Over the last 60 years, the South African stock market has delivered a total return of 7.7% p.a. ahead of inflation. But only 3.3% of that came from capital growth and, staggeringly, 4.4% of this growth came from re-investing dividend flows. Put your dividends back into your share portfolio.”<\/p>\n A corollary of this is: don\u2019t forget to include companies in your portfolio that have a high, sustainable dividend yield, even if they are not as sexy as the \u201chot stocks\u201d said Blount.<\/p>\n “Stockbrokers charge a stockbroking fee as well as a minimum fee per transaction. For smaller investors, or smaller trades, beware that the minimum charge does not make the transaction unviable.”<\/p>\n “For example, a R100 minimum charge on a R5,000 trade is a 2% charge. If you are both selling and buying another share, that implies a 4% trade cost which means that the share you are buying needs to go up 4% before you start making a profit.”<\/p>\n![\"\"](\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2015\/09\/Robin-hood-money.png\")
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\nAvoid \u201cLong Tails\u201d through not selling out and buying more losers<\/strong><\/h3>\n
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\nAvoid biases towards well-known large cap shares<\/strong><\/h3>\n
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\nBe aware of single factor drivers in the portfolio<\/strong><\/h3>\n
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\nWatch rights issues and other corporate activity<\/strong><\/h3>\n
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\nBe aware of cash and dividends<\/strong><\/h3>\n
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\nBeware of minimum trade costs<\/strong><\/h3>\n
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\nConsider your time frame for each share<\/strong><\/h3>\n