Hi Friends,
A lot of people tell me that they have a lot of stocks in their portfolio. When I ask them how much they had initially invested, they are clueless and say that they have been investing for a long time. The demat account is huge and their homes are flooded with random annual reports of companies whose very look and tone speak volumes about the unprofessionalism and their bleak future.
These are the very people who complain about stock markets not giving adequate returns. My reply to them is simple and curt: If you are going to buy crap, you should expect crap in return.
Warren Buffett had once famously quoted, "When people overdiversify a lot, they are not diversifying their risk but they are diversifying their ignorance."
So, how many companies should you have in your portfolio?
The answer is very simple: "Have as many companies in your portfolio which you can manage for efficient returns and which are established names. To put it simply, one should not have more than 15-20 companies in his/her portfolio." Choose the sector which you feel is going to be the breakout sector in the near future, analyse the top 3 companies in that sector and buy only one company from that sector.... I repeat "Buy only one company from the sector which you feel is a great sector and a great company to be in." If you are having Tata Steel, Jindal Steel and JSW Steel in your portfolio and you feel that you are a proud shareholder of 3 great companies, its time to reflect on the blunder that you have made. If there is a slowdown in the metals sector, all the 3 companies will take a knock.
Hence it is very important to choose one company from a sector which you think can weather the storms of adversity or financial meltdowns and stick to it through thick and thin, if you are planning to invest long term. Always remember that the stock market is not a casino. If you are expecting a return of 50-100% return in a year in stocks, they would shut down the casinos.
A little bit of this and a little bit of that will do nothing but will confuse you totally. So if you have a great company like L&T in your portfolio along with a losing stock, the gains that you make from a blue chip would be offset by the losses in a company with bad fundamentals.
Hope this article helps all of you who are scared of analysing your portfolios due to the junk that has been bought. Have a concentrated portfolio just like the Warren Buffets or the Rakesh Jhunjhunwalas. All the rich investors worldwide have a concentrated portfolio.
Your Friend,
Vivek
A lot of people tell me that they have a lot of stocks in their portfolio. When I ask them how much they had initially invested, they are clueless and say that they have been investing for a long time. The demat account is huge and their homes are flooded with random annual reports of companies whose very look and tone speak volumes about the unprofessionalism and their bleak future.
These are the very people who complain about stock markets not giving adequate returns. My reply to them is simple and curt: If you are going to buy crap, you should expect crap in return.
Warren Buffett had once famously quoted, "When people overdiversify a lot, they are not diversifying their risk but they are diversifying their ignorance."
So, how many companies should you have in your portfolio?
The answer is very simple: "Have as many companies in your portfolio which you can manage for efficient returns and which are established names. To put it simply, one should not have more than 15-20 companies in his/her portfolio." Choose the sector which you feel is going to be the breakout sector in the near future, analyse the top 3 companies in that sector and buy only one company from that sector.... I repeat "Buy only one company from the sector which you feel is a great sector and a great company to be in." If you are having Tata Steel, Jindal Steel and JSW Steel in your portfolio and you feel that you are a proud shareholder of 3 great companies, its time to reflect on the blunder that you have made. If there is a slowdown in the metals sector, all the 3 companies will take a knock.
Hence it is very important to choose one company from a sector which you think can weather the storms of adversity or financial meltdowns and stick to it through thick and thin, if you are planning to invest long term. Always remember that the stock market is not a casino. If you are expecting a return of 50-100% return in a year in stocks, they would shut down the casinos.
A little bit of this and a little bit of that will do nothing but will confuse you totally. So if you have a great company like L&T in your portfolio along with a losing stock, the gains that you make from a blue chip would be offset by the losses in a company with bad fundamentals.
Hope this article helps all of you who are scared of analysing your portfolios due to the junk that has been bought. Have a concentrated portfolio just like the Warren Buffets or the Rakesh Jhunjhunwalas. All the rich investors worldwide have a concentrated portfolio.
Your Friend,
Vivek
This makes a lot of sense..
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