Two readers of this blog left couple of intelligent questions in comment section on some of the articles. Both of these questions relate to what I term as rebalancing the portfolio (or profit booking). I wanted to wait until I posted articles on TIPBlog portfolio update and risk analysis. I wanted to discuss these two questions in the context of TIPBlog portfolio. It will help better understand the re-balancing and profit booking processes.
You may have read earlier post that discusses risk analysis. I made a comment that the portfolio has overexposure on few stocks like ONGC, LNT, etc. I also mentioned that I will not be selling any partial shares to bring down allocation. Many use the term profit booking for partial selling.
In an earlier post, I mentioned that I use XIRR as one of the metrics for measuring the individual stocks performance in my portfolio. In simple terms, XIRR is the interest rate you would need to make the same money from any interest bearing account (with same investments). While XIRR can be extended at portfolio level, in today’s post, I am only discussing how I use XIRR at individual stock level.
the euphoria of RPower. That was when I actually came to know the ‘ABC’ of stock markets. I wanted to make quick bucks (and still in that mindset I feel) and subscribed to full limit thinking it would double in no time after listing. I even borrowed from my brother to invest on his behalf. I didn’t know what was a ‘bull’ or ‘bear’ and just blindly went on buying stocks which propped up in media and held some 2L worth of stocks during the Feb ‘08 – June ‘08 period. I didn’t even know that a fully charged bear market was ongoing until it was too late for me to grasp the various terms and happenings around the world.
In my last post, I discussed about two important but overlooked aspects about dividend investing. Today, I am discussing few tidbit that I have learnt over the years. 
Measuring Progress – XIRR as Personal Rate of Return
In this context, I use few different monitoring and/or performance metric. Earlier, I have talked about yield on cost as one metric to determine cash flow (or dividends) received from my original investments. YOC is a very good metric to measure the growth of your dividend based cash flow over a period of time. However, it has a drawback. It does not take into account the variability of capital invested. The price of the stock does not remain static. It keeps changing over a period of time.
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