How to build a concentrated PF

Hi all. I’m looking for suggestions on how to cut down on my PF stocks. I believe I’m over-diversified and need to have not more than 10 stocks to properly build wealth.
Currently have a PF of 41 stocks valued at 30L, with 26 of them having a combined allocation of about 30%. Have some duds too which I haven’t been able to cut so far.

P.S. The column labeled ‘allocation’ is actually the current value.

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This is a question to which many different answers can be given.

This question has been asked by many in the past in the forum, and many answers were given, many discussions have happened, which provide insights in understanding the nuances for the seeker, you can search.

You have to first decide how to trim your PF down to a reasonable level as per your understanding of the businesses, so if you can think of the stocks that you want to exit and mention the reason for exiting, maybe someone who follow those stocks can reply.

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Thanks for the insight Chaitanya.

Mostly, I’m looking to exit the ones with the lowest allocations and in big losses like Paytm, IEX, NIITLTD, CONFIPET, RAININD. These stocks were either bought in IPO or bought on tips and held through stage 4 breakdown.
20 of the stocks were bought with 5L under a smallcase I subscribed to last year and am no longer subscribed to. Never touched these other than the occasional re-balancing and selling APARINDS recently.
Perhaps I need to evaluate each business, see how it’s doing currently and then decide whether it’s worth holding or selling.

I guess a lot of people buy many stocks at the beginning, for whatever reason, and may not allocate to these stocks much, again for whatever reason, and after a while the thought of having too many stocks crosses their mind, and a step is taken towards that direction. I don’t remember the exact number of stocks in my PF a few years ago, but I do remember adding many stocks from time to time, and selling them later. All part of learning, the journey can start that way for some.

Have clarity regarding the approach you want to have towards your PF, the approach need not yield returns soon, but if it gives a shape and form to the PF, then that can be a first step in a direction.

You may not have done this while buying the stocks, but do make a note this time when selling stocks, make note of why you are selling them, and if sometime in the future if you intend to look at any sold stocks, these notes help.

Just like we can build a PF using different approaches, different schools of thought, we can trim and maintain a PF using different approaches too.


The first step you can take to trim the number of stocks, which i have also done is…first put same sector stocks together like in your case all banking stocks together like IDFC first bank, Federal bank, equitas bank…Once you categorise all stocks in different sectors , then think of restricing stocks under each sector, for example, you might decide you want to restirct to only 2 stocks in bank and may be 2 stocks per sector. Lowest allocation and big losses may not be a right criteria because you may wind up selling all stocks of some sectors. Proper balance among sectors will not be achieved. Then you can think of choosing one from large cap another from midcap, if u want to select 2 stocks per sector.
In short, “There has to be some Method to the Madness”


To build a concentrated portfolio you need to know -

  • Understanding of business & industry dynamics
  • Your own investment time frame
  • Ability to value a business.
  • Brain wiring to handle volatility (This one being the most important)

I always wondered why many people cannot invest 15-20% in single stock, after spending some time alone in silence, I found the answer to why I can do it and many can’t.

What I’m doing is “betting on stocks where losing money is difficult.”, instead of trying to betting on making money.


That may defeat the purpose of high allocation for others, because limited downsize does not guarantee superior returns, which are the reason for allocating more. I bet because I know that the high returns along with the high capital will make meaningful change to the PF. Yes, I do agree that when allocating big, no loss is also good, but I am not sure if all prefer that.

And even people who bet big, may not go in all at once, but gradually build positions, as and when what they have envisaged is happening, they average up. Of course some may average down because of their conviction, many ways to skin the cat, as we know.

Once can allocate 25% of the PF to ITC or TCS, the chance of losing is less, there could be some loss of course, but who would want to make high allocation to such stocks. Over the course of years, if not sold, from the initial position to the current holding, stocks may occupy 25% of the PF, that is a different story.

My limited point is that, there are different schools of thought for betting big, different perspectives.

Just my 2 cents.

I dont know about others but it satisfy my purpose perfectly, nothing is guaranteed in stock market, low downside is mostly higher upside if you think in that way.

See the analogy of lift, once it reached ground floor, where it is expected to go then?

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Of course I agree. We all have our perspectives, and if they are serving our purposes and making us profitable, then all good. And to find what works is what I guess takes time, and the sooner the find, the sooner the profit, the very reason why this forum is great in that regard, we have many kinds of investors, each with their own perspective, analysis, and churn.

And it is obviously helpful to have members who talk about safety first, limited downsize, and relatively better results. I, for one, appreciate all the different schools of thought, as it helps to make better decisions, as I get to see many different views.

100 percent agree. In stock market, there is always the perception by many that higher risk means higher reward!! But this is not true at all.

In the recent past I would take my favourite example . Pfc was trading in range of 100-130 with a dividend of 11 rupees. Pe ratio of 2.5, increasing dividend, increasing profits.

Now it has given 150 percent returns!! (From oct 2022)

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It was a stock guaranteed for a 14-15 percent cagr return over next 5 years and ended up giving 150 percent returns in 9 months itself!!

Having kinda been where you are over the last few years and still developing my knowledge on this subject I can only share my experience in this journey so far.

I’ve come to the conclusion that I can only hold as many stocks as I can track often, or the ones who’s fundamentals and story is good enough for the next 6 months to 2 years or so, but still keeping updating with their reports and other news related to them.

If I was in your place I will go through all the current AR/QR/Concalls of the companies im holding and only then take a decision on which companies i’m willing to continue holding a stake in and which ones I wont. Maybe even in your loss makers you might just find a turnaround story.

In the meantime read some books by the masters, deepen your knowledge on how to find good value picks and evaluate companies.

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Value investing is tough compared to growth investing, in the sense that, it is relatively easy to go with where there is activity, where there is participation, where there is coverage, more things come to light, valuations could be high, sure, but they could remain so for more quarters, and investors who do growth or GARP type investing are reasonably sure if such valuations can sustain or not, and may think of coming out, and they find another such story.

Even for investors with many years of experience, it could be frustrating to see the price not moving as per their vision, there are a lot of moving parts.

The person who you replied has deep understanding of the business, so he bets on value, for others without such understanding, it is tough to make such calls.

As for me, I try all kinds, because they all work, I may not be able to do properly, but they all work depending upon some factors and in certain contexts. This is the reason why there exist many books on different philosophies in the market, because they all work. Jim Simons is correct, Buffett is correct, Lynch is correct, Joel Greenblatt is correct, Minvervini is correct, Michael Burry is correct.

Just saying.

I believe I’m over-diversified and need to have not more than 10 stocks to properly build wealth.

What makes you say so?

There’s no standard rule. You’ll need to find your own. The first step to finding your answer is to figure out what truly is driving your need to reduce the stocks and how you define over-diversification.

You’ll not find one framework on which every investor agrees. Eventually, everyone customizes their allocation/strategy according to themselves {takes iterations I belive}.

  • Ashish Chugh usually doesn’t take beyond 1 - 2% allocation in his microcap picks - at max 2 or 3% [Source].
  • If I am not wrong Samir Arora (Helios Capital) would not hesitate to have somewhere between 20 to 30 stocks. Similarly, Kenneth Andrade controls his own.
  • RJ had over 30 stocks yet made money. I think Mr. Kacholia has even more