Emotion and Expectation

Dear Readers,

We have received several comments and emails on short term and long term investment, portfolio size and shape. During analysing the portfolios we found that most of them contains several stocks with low quantities and poor allocation. Below are some examples to realign the portfolio to ensure the gain.

Initially need to keep the portfolio concentrated for example 100K investment allocated for 4 stocks with 25% allocation in each. 

Now question comes that which shocks are most suitable? 

Even though most of the stocks can give return around 300 -500% in 3-4 years, still it is observed in last 4-5 months that most of the new investors lose patience within 3-4 months if there stocks are in red. It happened due to little bit higher buying price and some market correction. I always try to suggest the stock at minimum price from where chance of further fall is very less and minimum risk on investment. 

I have made small change in our strategy and posted last three stocks with price above 100 rupees. These companies are well grown and near to make good turnaround in short term (within year). Same time I have replied to several comments to buy seasonal stocks at lower level which are able to give 30 -35% profit in coming quarters.

It is all to bring red portfolio into green. It will also help to maintain the motivation of new investors. But all these steps need to be taken timely to capitalize the gain.

Why we will go for concentrated portfolio with 25% allocation in each stock?

For example: X company stock bought @ Rs. 25 and total 1000 shares bought for 25% allocation in the portfolio. If investor will sell 250 share with 30 -35% gain than his buying price will come down to Rs.18. Even after selling 250 shares, allocation per stock still stand at 20% of portfolio. Same time he has cash to invest in new stock which has good fundamental and trading at lower level.

First aim to make the entire stock holding free of cost with 100% profit than it is very easy to hold the remaining 50% free shares for long term and reinvest principal amount to expand the portfolio again. 

Which are the stocks good for short term as well as for long term and long term only?

1) These companies are already grown up and very near to give good gain. Investment in these companies are very good short term as well as for long term. It may be seasonal ( Insecticide, Waterbase, JK Agri, DTIL) or situational ( TCI, TIIL, Talbros Auto) 

2) These companies are in the growth phase and it will take 2-3 years to show significant change in profit. Investment in these companies are very good for long term only (Donear, Kothari Petro, Surana Solar, KIL). These companies currently trading at lower level but able give more than expected gain in long term.   

              

Conclusion

Above examples are given to achieve the first target 100% gain, it is just split of our main target into two part, first need make investment free of cost than hold the remaining for long term to get gain of 300 -500%. Need to keep balanced portfolio by giving 75 % allocation to the grown stocks which can give good return in 1-2 years and 25 % to the stocks which will give return in 3-4 years. Above approach is specially good for those new investors who are in initial stage of their portfolio formation.  

Always try to add stocks at lower level during market correction and need to keep emotion and expectation in control during rise and fall of market. These are most important factors that ensure the success in stock market.