Tips for managing a systematic portfolio 

This is the fifth and final article in our series looking at how you can build a systematic portfolio of shares by using the tools available at Stockopedia. In the first four articles we explored the steps that any investor needs to take in approaching the market, defining a strategy, constructing a portfolio and giving it the best chance of success. In this article we’ll look at a few of the things to think about when managing that portfolio over time. 

During the series we introduced a example Systematic Value strategy to explain how a portfolio can be created. We built the strategy by merging the metrics and parameters of Joel Greenblatt’s Magic Formula and Joseph Piotroski’s F-Score. What that gave us was a focus on good quality cheap stocks that that display a strong and improving financial health. According to Greenblatt, Magic Formula stocks should be bought in batches of between five and seven every two to three months over a year (although for simplicity we made all our theoretical purchases at the same time). 

The next question is when to sell? For many of us it's natural to take an active interest in how the portfolio is performing and changing and making active selling decision may seem like a critical component of being your own fund manager. But this needs careful thought because individual decisions can be costly since our human ‘fear and greed’ responses come into play. If you’re interested in implementing a systematic approach, it might be better to eliminate any possibility of your heart ruling your head by having and sticking to a strict system of periodic rebalancing. 

In this series:
How to get started in the stockmarket with Stockopedia
How to create your ideal investing strategy (value, growth, dividends)
How to turn a strategy into a portfolio with Stockopedia
How to give your portfolio the best chance of success
How to manage your portfolio over the longer term 

What is rebalancing? 

Rebalancing involves tweaking a portfolio that has drifted away from what it set out to do when you first started. Having some sort of rebalancing strategy is essential because, over time, the make-up of all those shares in your portfolio will change – even if you do nothing. As markets rise…

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