Smartcat - Portfolio Checkup

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Topic: Smartcat - Portfolio Checkup

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smartcat
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Joined: 29/Mar/2007
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Posted: 15/Jan/2010 at 4:27pm

Different strategies suit different individuals. This deb/equity mix strategy is not at all suitable for -

- somebody who is earning a regular salary income from a job

- somebody who has just started investing in equities (ie, equities form a small part of their overall networth).

But this strategy might work out well post-retirement or for young guns with no other sources of income other than investments.

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wild dog
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Joined: 19/Jan/2010
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Posted: 19/Jan/2010 at 4:51pm

Dear Smartcat,
Don't you think the number of companies in your portfolio is very High. though this may reduce your risk this will reduce your returns also. Please consider whether reducing the number of companies to 20 max

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smartcat
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Posted: 19/Jan/2010 at 5:03pm

So far, the theory that too many stocks reduce returns is proving to be untrue. Out of the 90+ stocks, there is always some stock that is moving up, with others going down and a few remaining where they are.

With a extra-diversified portfolio like this, the daily movement (up or down) of the portfolio does not depend on the sensex movements anymore - they depend on the advance decline ratio. Whenever the advances are more than the declines, portfolio value keeps climbing up (and vice versa).

Those 90+ stocks are there NOT to reduce risk - but to help make sell decisions. When there are so many stocks moving up at different times, stocks reach "high" P/E's one after the other.

Selling becomes incredibly simple then - get rid of the highest P/E stocks first.

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hit2710
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Posted: 19/Jan/2010 at 5:35pm

Do you always have a portfolio having such a large no of stocks or this is an ocassional phenomenon?

Stockmarket is a weird place. For every person who buys a stock there is a person who sells it and both think they are very smart.

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smartcat
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Joined: 29/Mar/2007
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Posted: 19/Jan/2010 at 5:38pm

Since Jun'09.

I have been working with portfolios of 15 to 30 stocks before. So I know that a concentrated (relatively speaking) portfolio doesn't do anything special if the stocks picked are not right.

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anilm
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Posted: 20/Jan/2010 at 6:19pm

Originally posted by smartcat

Since Jun'09.

I have been working with portfolios of 15 to 30 stocks before. So I know that a concentrated (relatively speaking) portfolio doesn't do anything special if the stocks picked are not right.

Though this is my personal view but in the rising market having a large number of stocks wont have any issue.But the concentrated portfolio will help once the markets enter consolidation.Having a large diversified no. of shares makes it look more like a mutual fund where some sectors and some stocks rise on one day and some on the other.This way i feel it would be even tough to beat the index.I may be wrong with this conviction of mine.

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smartcat
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Posted: 20/Jan/2010 at 11:54pm

There is no real evidence to prove that a concentrated portfolio performs better - whatever evidence there is, it would be only anecdotal. If you give the example of Rakesh Jhunjunwala (concentrated portfolio), I will give you Peter Lynch (diversified portfolio). If you put forward Rs. X, I will put forth Mr. Y.

Most MFs in India hold 50 plus stocks - it doesn't mean all of them fail to beat the index. Taurus MFs mostly have less than 10 stocks - but they are among the worst MFs you can buy in India.

So at the end of the day, your performance depends on the quality of stocks that you pick & host of other factors rather than the absolute number of scrips.

There is only one proven rule in investing - capital appreciation in a stock over a period of time depends on its earning growth. Now if I find 90 plus stocks at a decent valuation with both past history & future probability of earnings growth, I will buy them!

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9StockPortfolio
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Joined: 10/Sep/2008
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Posts: 479

Posted: 20/Jan/2010 at 11:53am

Originally posted by Vivek Sukhani

By the way, any idea about Narmada Gelatines?

Vivekbhai, do you have any inputs on this?

Pursuit of Value

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