Diversification vs Concentrated Portfolio

[The_Confused_Consult]

As mind is fresh, I just wrote a piece of concentrated investing.

Guru Mantra 16- Competitive Advantage: Racing for Uniqueness (The Second Part)

The Strategy of Having a Concentrated Portfolio Moving away from bit of continuous stuff on stock analytics, this was something I was discussing in my group couple of hours back. Couldn’t wait more to share post meeting. It has been an eternal debate whether to have a concentrated or diversified portfolio. One section believes diversification means diversifying the risk, hence it’s better off to manage a big carnage. On the other hand second section believes diversification stems from not know…

If I peek into your file of portfolio, I may ask these questions to myself:

1. Banks, Pharma, Infrastructure, Airlines, Luxury jewellery and long tail. Do I understand all of them? For example renewable energy is not my cup of tea.
2. Even if you want to diversify, chunk the themes. For example- why 5 banks, 5 pharma. Why not select one in each sector? Second theme will be diversify only on high public float or low public float? High public float will allow you to escape easily. Another theme should I go for low base companies like 200-500 cr MCAP.
3. A bear case- as so many diverse companies are there what’s my action plan a. when stock fundamentals are worsening (how do I know and jump the ship). b. in case market crashes which one to sell and keep.

To confirm whether your diversification works, you need to know CAGR. If the number of 30% in file is one year then it’s an excellent return for such a diversified portfolio.

I guess you run a business understanding, should be able to prune quite a few.

Good luck.