InvestorQ : Is there is a method wherein I can constructively and profitably average positions?
Priyanka Jain made post

Is there is a method wherein I can constructively and profitably average positions?

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Swati Naik answered.
3 years ago
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This has less to do with the fundamental shifts in the stock and more to do with your own portfolio mix. Assume that you are having a 20% exposure to the banking sector. That is normal for a diversified portfolio considering that banking has a similarly high weightage in the Nifty too. However, if you continue to average your banking positions and that takes your exposure in banking to 40% then you have a serious concentration risk on hand. Your concentration risk should also be seen in the context of the sensitivities of the mix to external stimuli. For example, even though your banking mix is 20%, you have added stocks of NBFCs, HFCs, auto companies and real estate companies and the combined share of these sectors is now 50%. Now, all these are rate sensitive sectors and can react negatively if rates were to go up or even if the RBI was to use more hawkish language. This one more thing you need to consider while averaging.
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