Portfolio Creation Help


#1

Hi All,

Could someone please suggest on individual portfolio Creation.
Suppose, I have buy 10-12 stock for 10 years… How it should be diversified?
I am not sure from which sectors to consider, and how many quantities from each sectors, large cap, small cap etc.


#2

Any suggestions


#3

Just Check

ww.smallcase.com


#4

Simple ,

Just buy direct MF - Midcaps .

you can diversify in MFs .

Get Reliance,L&T, SBI Midcap Funds.

you are not going to do any better in picking stocks then MFs. Since they have resources to pick the best ones.


#5

Thanks, I have already invested ineach large, mid, small, and multicap.
Thinking to replicate same with Stocks portfolio. Not sure it is good or not.


#6

Not worth it.

you will probably end up buying the same stock that you have in your MF portfolio.


#7

Hmmm


#8

keep in mind, tentatively this much time is required for each section to complete there growth cycle…
large cap for 3-5 yrs
mid cap for 5-7 yrs
small cap 7-10 yrs
micro cap 9-12 yrs


#9

Nice info, is these growth cycle applies to both i.e. stocks and MF


#10

Form multiple virtual portfolios on moneybhai.com implementing various strategies.
See which suits you better.


#11

@Vaibhav_Joshi1
Great to see that after a long time, someone is willing to go for long-term investment, and also willing to ditch the costly and ineffective mutual funds.

My two cents:

  • Purchase 4 large cap banking stocks - 2-3 in private sector, 1-2 in public sector. They go yo-yo based on global developments and local monetary policy, offering scope for higher returns to be captured along the way
  • Take 3-4 beaten down large cap pharma stocks. They always follow cyclic nature and spring back. You will see multiple such occurances over 10-12 year horizon.
  • Pick 2-3 FMCG companies would be a another good addition, most pay regular dividends offering tax-free returns
  • Pick 1 each from large cap real estate, IT, and Auto sector

That should suffice for pfolio creation.

NOW the Most important thing - taking profits!

Understand the concept of CAGR - Compounded annual growth rate (google it, if needed)
Track your profits on monthly or quarterly basis. If your CAGR is hit, take profit and move to other stocks.


#12

Thanks a lot!
You got me, this is what I am looking.
Sure, I will keep in my mind while creating my folio.
Thanks again.


#13

Another simple way is simply pick the NIFTY Alpha 50 stocks.

Let the index guys do all the hard work. :slight_smile:


#14

@Vaibhav_Joshi1
Also, you can attempt index based investing as suggested by @trader_dude

However, please note that index-based investing offers only average market returns, as an index is always a representative value of the average of selected few stocks. You wont be able to benefit from stock-specific higher CAGRs, but then its your call.

Here is a great and clear Indian example of index based investing through ETF:


#16

Cool, Thanks. That’s also good idea to invest partially in any of good ETF along with Quality large cap.
Niftybees is in my watchlist.


#17

@Vaibhav_Joshi1
You have one good candidate available as of now :slight_smile:


#18

Cool, Thanks a lot @RSOptions :slight_smile:


#19

@RSOptions
Regarding taking profits - If suppose my 3 stocks out of 10 meets my CAGR, then I should book profit in those and look other opportunities?

I like your strategy for profit booking, I usually follow it booking profit and reinvesting both amount and profit. But I feel it contradict with long term because in my understanding long term is to stay invested in single script. Right?
However in this case I did not understand why people say long term have compounding benefit… because what appreciation we are getting due to growth not from reinvested profit etc.

I think framed question quite big - Please bear with me…
So which approch will be the best… Stay longer in a stock or keep rotating money by booking profit and reinvested.

Thanks!


#20

@Vaibhav_Joshi1

Yours is a good question, and indicates the seriousness about investment - something that is hard to find by nowadays :slight_smile:

Now to answer your q:
if you’ve understood the concept of CAGR, in simple terms it helps you compare stock performances. If stock A generated 112% returns in 6.5 yeas, and stock B generated 356% returns in 10 years, How do you compare which one performed better? The answer is CAGR.
Like % of marks, its a single number which allows you to compare investments in different securities over different time periods.

Also understand LONG TERM means uncertain period - can be 5 years, 8 years, 20 years or whatever

If I have invested in PNB for LONG TERM, I’ll look at PNB’s historical data, and calculate its CAGR in periods of different times.
Say I’ve been holding PNB since last 5 years and now I need to decide whether I should book profit or not. I calculate CAGR on historical data for every 5 year period (2001-2005, 2002-2006, 2003-2007, and so on). That list of calculated CAGR figures gives me an approx. value of how CAGR has performed over the LONG TERM for the time period till I’ve been holding the stock. In this case, over a 17 years period (2001-2017), I’m checking it for every 5 years - that is my already invested period.

If my presently invested CAGR is better/similar to that average CAGR figure, I’ll book profits. Using that money, I’ll immediately buy another beaten down stock.

Why it helps to book profits? People often quote example of biggies like MRF, Infosys, etc. that have been consistent risers over long term. But the question is - can you spot the next riser?
If you see history of IFCI, that has been down from Rs. 112+ levels to Rs. 23 between 2007-now. Unless you book profits regularly, you wont be assured of returns.

Summary - Backtest on historical data. Don’t sit like a blind follower, because you never know which PNB, which Satyam, which Global Trust Bank will ruin your money.


#21

Dear @RSOptions,
Though I am not the one who asked this question, but want to thank you anyways!

It is really hard to find someone who offers so much insights with detailed information. Truely appreciate your feedback about investment methodology, and detailed calculations which I’ve seen at multiple threads on this forum.
I’ve also seen your detailed calculations on previous threads that tested complex options strategies suggested by others.

Keep it up!

Thanks Again.