How did your portfolio perform in 2010? Whether it did better or worse than expected; as we usher in the New Year, there are several strategies you should employ in order to maximise portfolio returns.

Planning and research is essential. Don’t get involved in chasing “today’s craze”. Instead, research your options and make sound decisions that fit your overall investment strategy. Stocks & Securities Ltd (SSL) continues to encourage investors to employ the value investing approach. That is, focusing on stocks with sound fundamentals, a history of solid financial performance, diversification and innovation and a sound management team.

Diversification is key. Simply put — “Don’t put all your eggs in one basket”. Diversification is the process of investing a portfolio across different asset classes in varying proportions depending on your time horizon, risk tolerance, and goals. While diversification does not assure or guarantee better performance and cannot eliminate the risk of investment losses, this disciplined approach does help reduce overall portfolio volatility. For example, when bonds are up, stocks often tend to be down and vice versa. By combining asset classes, you will be able to smooth returns and limit losses due to overexposure to volatile market segments.

To put this into perspective, while it may be extremely difficult to predict the best performing assets, following a diversified asset allocation strategy allows you to reap gains from top performing securities while limiting exposure to the worst performing assets.

Re-balance to stay on target. With a constantly changing environment, the consequences of inaction are profound as individuals seek to fulfill their specific investment needs whether for retirement, college financing or purchasing a home. Re_balancing is the procedure of adjusting the asset classes in a portfolio following a significant change, such as a move from a bear to a bull market to ensure the goals of the investor are maintained in compliance with his/her risk tolerance. For example, if the maximum allocation of any one stock in a portfolio is ten percent, and one stock appreciates rapidly the optimal strategy would be to sell a portion of that stock in order to reap the gains and return to the original allocation. On the other hand, if you hold a blue chip or value stock which sees a significant price decline, it provides an opportunity to increase your holdings and return its allocation to ten percent.

Dollar cost average to grow your portfolio. Dollar cost averaging is an investment strategy in which securities are purchased in fixed amounts at specified intervals. This is a type of buy/ hold strategy, which provides investors with the opportunity of making regular investments, eliminating the need to determine the “right time” to purchase stocks, Exchange Traded Funds (ETFs), mutual funds or other assets. Dollar cost averaging therefore allows an investor who may not necessarily have a large initial lump sum, to build his/her portfolio over time.

Buy low/ Sell high. One should always bear in mind the old adage – “buy low, sell high”. While this is good advice, recall that timing the market, that is, trying to guess when it will hit a high or a low, is difficult and nobody can do it reliably. Therefore, the best strategy is to look for fundamentally sound Companies with attractive price multiples relative to their peers. For example, at a price of $6.01, Jamaica Broilers Group Ltd (JBG) is currently trading at a Price-to-Earnings (P/E) of 7.48 times, one of the lowest in the Manufacturing Industry on the Jamaica Stock Exchange (JSE) Main Market. The Group boasts a prudent management team and is poised to continue to grow long-term value, owing to its diversified revenue streams. Likewise, at a current price of $18.58, National Commercial Bank of Jamaica Ltd (NCBJ), trades at a P/E of 4.13 times, the lowest among its Finance Industry peers on the JSE. NCBJ remains a fundamentally sound Company with a strong capital base and a track record of growth. Another stock pick is conglomerate, Pan_Jamaican Investment Trust Ltd (PJAM), which trades at $46.56, which is 0.8 times its Book Value. PJAM’s subsidiary, First Jamaica Investments Ltd (FJI) continues to exhibit strong performance, bolstered by its Property Management and Rental segment.

In closing, SSL encourages investors to maintain a cash reserve so that when things get turbulent, whether in the stock market, real estate investments, or everyday life – an emergency fund can help protect your investments. Maintaining some amount of liquidity may prevent taking a loss and being forced to sell some of your growth stocks or other investments during a market dip.

So for 2011, be sure to utilise the investment strategies of planning, researching, diversifying, rebalancing, dollar cost averaging, and buying low/selling high. These combined will lead to a portfolio that is systematically developed and well-positioned for growth as you seek to achieve your goals in 2011 and beyond

Deon McLennon is an Equity Trader at Stocks & Securities Ltd (SSL). You may contact him at dmclennon@sslinvest.com.