Can active management of portfolio lead to greater wealth in long run?


(stockforwealth) #1

It has been observed that even the greatest wealth creator stocks have given psychological pains to many retail investors for long years before they could create wealth in relatively shorter span of time afterwards. As a result, retail investors seldom hold them long enough to gain real wealth even from best of the best stocks. Rather, during the years of pain in supposedly best of stocks, many runners up stock generate handsome returns for quite few years even though they do not prove to be 100 baggers in say 25 years. Considering this, one thought emerges that why not be with the set of stocks which are performing in current times and switch over to another set which start performing and keep on rolling the returns with invested amount for 10-15-20-25 years. The real issue remains how to identify stocks which will at least work for 1-2-3 years. Can it be done with technical aspect of stocks rather than fundamentals assuming that as of now, in the age of information, fundamental shortcomings will not remain hidden from expert eyes of valupickr kind of people and it will reflect in price. For a beginner, it is of course prudent to start within the widely recognised sets of stocks, say S&P BSE 500 or at the most S&P BSE SmallCap & not the XC, XD, XT group in the beginning.

For this very purpose, I wanted to start discussing the concept with some example. I have put the S&P BSE 500 stock spectrum to certain scrutiny and have tried to identify some 10-15 stocks at a time, buy & hold them till they keep on satisfying those screening rules, then shift the total investment to another set of 10-15 stocks which appear performing compared to the earlier ones.

We have just witnessed Nifty’s levels of 10140, then 9685, then again 10180, and again 9700. It is in great debate whether market will move up or move down and there may be circumstances for both the cases. Of course, there will be stocks which will defy the market trends in both the cases, at least for quite some time. It will altogether a different scenario if the broader market takes downward trend for long, where even the quality stocks succumb as in upward trends some stocks perform unexpectedly.

I request fellow valuepickr boarders to please take a look at the sheet below which comprise of S&P BSE 500 stocks applied with certain rules for their behaviours during these high-low-high-low situation in Aug.-Sept.'17. It has been attempted to pick stocks from 3rd Oct.'17 onwards for 10-15 years in a manner discussed above. The cells of the script name column, that appear qualified from the applied rules, is marked in red colour with yellow colour text in bold.

I would love to get frank opinions. And yeah, do not laugh please. I am not an expert. Just trying to learn - What Works on D-Street?

Disclosure: I have neither made nor lost money in equity, even though I have bought & sold many stocks since highs of 2010 in very very small quantity (small enough that would disqualify me even for discussing on such matters). But, I believe, if one can not make 2 Lakh from 1 Lakh, then what is the point of investing more.:slightly_smiling_face:


(Vijay) #2

Imho Investment is not just short term returns. We can make 2 lakhs from a lakh after 3 years. Trying to earn it next year brings with it extreme risks unless you understand the business better than mr. market.

Usually a knowledge of the business and company will help us to zero in on the stock. That is from fundamental analysis point of view. It is sometimes strange that what we see around us could be the biggest advantage for a small investor. I was sitting in US with paper knowledge while Indian residents had a tremendous edge over me. I realized that Indian residents could catch some ideas few years ahead of me. I realized it only after I came back to India.

Actually I have seen that market lags behind by even 2 years before understanding a business growth story. So it can be hidden for 1 or 2 years.


(Left this forum) #3

It has been observed that even the greatest wealth creator stocks have given psychological pains to many retail investors for long years before they could create wealth in relatively shorter span of time afterwards.

You forget to mention it has broken 90% completely out of market and their memory. I escaped twice!

Can it be done with technical aspect of stocks rather than fundamentals assuming that as of now, in the age of information, fundamental shortcomings will not remain hidden from expert eyes of valupickr kind of people and it will reflect in price.

Technical analysis is far bigger and older animal. Yes it can be done, people are purely technical , purely fundamental and also techo fundamental. No market is not efficiently priced, it will never be as we humans can not think alike. We are the one who drives the prices, even noble prize winner have lost shirts in market, forget that John Maynard Keynes the god of economics could not survive market.

Rest all you have written can be traced to two themes A. Risk management B. Position size

Pyramiding, selling into strength, high capital rotation with lower margin and roll back etc are all part of these subjects.

I would suggest you to read a bundle of books, shadow a portfolio manager/experienced investor as mentor. Then of course begins the art of managing risks, losing heavily again and again.


(Amit Jain) #4

There is no doubt that holding good stocks for a longer period of time, will give unmatched returns. But, how many of us can really identify good stocks is the questions. And even if one was a willing learner, then what are the chances that he’d get the right tutelage.

After successfully finding answers to several such questions, does one become a true blood long term investor. Its like its said “Aag ka dariya hai, doob ke jaana hai”

You either have to be born into a Mittal family or end up creating a successful blog :slight_smile: