What is the significance of technical analysis in portfolio building?

Portfolio building is a process of selecting securities optimally with the sole aim to achieve maximum returns while taking minimum risk. A well-made portfolio consists of diversified securities such as stocks, bonds, money market instruments, etc. to reduce the overall risk. 

Technical analysis is the only form of analysis which helps to determine exits out of an investment even before the money is on the line.

This is one major drawback of fundamental analysis, that fails to gauge the exit level in case things go wrong. The only time it calls for an exit is either when the company becomes fairly valued or stops performing well.

Rightly timing your investment decisions could become the difference between a winning and a losing portfolio. Generating alpha in the stock market is difficult without appropriate timing of when to enter, exit, reduce or add on an existing position.





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