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Rohan Saha
Founder - Burn Finan... • 2m
The market might have bounced back, but I can confidently say that many people’s portfolios still look the same or maybe even worse. One big reason behind this is something called the advance-decline ratio. A lot of us tend to judge our portfolios based on how the index is doing. But here’s the thing: the companies that make up the index aren’t always the same ones we personally own. That’s why NSE and BSE publish the advance-decline ratio every day it gives a better picture of what’s really happening under the surface. For example, let’s say there are 100 companies listed on the NSE. If only 10 of them are doing well (in the green), that means the other 90 are in the red. What really matters is how many of your stocks fall into those two groups. If most of the stocks are declining, chances are your day’s profit and loss (P&L) will be in the red too. And if more are rising, then your P&L will likely be green. In the end, it's your individual stocks that matter not the overall index. Sometimes, the index can drop sharply, but your portfolio might barely move. That’s because your holdings might not even be part of that index. Take Nifty 50, for instance it includes India’s top 50 companies. But it’s not like everyone owns the same 50 stocks. It might sound a bit complicated at first, but once you understand how it works, it all starts to make sense and it's actually pretty simple.
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