Hi, does it makes sense to buy 100 (or more) quantities each of top 150 performing stocks (not part of Nifty 50 & Sensex 30) instead of investment on mutual funds, would the return be better? Usually people say portfolio should be around 15~20 stocks, but if you have 150 stocks in portfolio, atleast if 50% perform and 5 are multibaggers and 20% laggards, still returns would be good?
I tried this pilot couple of months ago, picked top picks recommended by top investors, news on TV, whatsapp forum groups, etc, collated about 250 stocks but brought it down to about 100 stocks and about about 50,100, 250 based on their price ranges. Invest about of about 10L yielded 2L profit within one month.
But good thing was the portfolio was green everyday with one or other stocks going up.
If I had put the same 10L in 10 stocks & if market goes up/ down, don’t know if returns would be ideal - maybe its luck!
According to CAPM theory it has been observed that after 30 stocks risks do not decrease(because of diversification) and there is no indication of better return. If you observe max investors believe in concentrated portfolio.
One the contrary now I am seeing some mutual fund houses are approaching towards the concentrated portfolio strategy e.g. Motilal Oswal Most fucus funds. They made cap of 30 - 35 stocks at max at a time. And my personal experience also I have seen that buying way too many stocks do not give us any extra benefit. Just keep and follow only one “mantra” of buying best stocks at reasonable price and have great patience, that’s it.
It could be a prudent approach.
Case study B:(5yr)
An investment of 10 k in each of these banks would produce a resultant gain of 2.03 L approx.
However if one decides to invest the entire 50k in Axis for example the resultant gain would stand at 1.6 L.
I have similar findings from the Pharma sector too.
In the end I think it is about personal preference. Some savvy investor might have read the numbers better than everyone else and invested everything in Indusindbank to net a total gain of 3.08 L. But it could work the other way too and go horribly wrong which is the downside of being stock specific. The upside to the type of diversification you suggested is that a single bad performer will not affect your portfolio considerably and you can participate in the gains of the entire sector. A downside, if you could call it that, is that it is capital intensive. I think you should take a look at Larry Hite and/or Julian Robertson, they had a similar system.
It works, but need lot of money , it worked for me , i tried with PSU Banks , i bought almost all PSU Banks shares , & return was around 35% For this strategy TA knowledge is required & also instead of fixed number of Shares , one can buy with fixed amount of money, . holding period must be at least 3 to 6 months.
Presently almost all sectors are on up side , so its better to buy selective stocks from different sectors.