WHY PORTFOLIO STRATEGY, NOT STOCK PICKING, DECIDES WHO WINS IN THE MARKET

When market context changes and focus shifts to new themes, equity investing must anticipate, prepare and respond.

- SHYAM SEKHAR

We need to approach dynamic shifts with preparedness and correct positioning. Portfolio strategy does this by helping position a portfolio in line with emerging context. It ensures overvalued, over-owned stocks with downside risk are reduced or exited. It keeps sector allocations in check when exposure rises due to market gains.

For instance, when a sector sees a sharp rise and we own many stocks in it, we can reduce risks when needed. We can capture outlier returns in euphoric times by cutting exposure gradually as valuations rise in a bull market. Portfolio strategy keeps us focused on what must be done to keep investments safe and growing. Whether a portfolio exceeds expectations or underperforms, we can address growth needs through sensible strategy.

Yet, we often don’t view portfolio strategy as being as important as stock picking. We trust that stock picking will deliver everything we want. We spend far more time sharpening stock-picking skills and very little on developing portfolio strategy.