My wife wanted to invest in the stock market but didn’t want to spend too much time on a regular basis following the stocks. I suggested to her to have a buy and hold, low churn, relatively low risk and low volatility type of portfolio with her savings. After talking to a me and a few of her friends in the investing community she is thinking about having the following portfolio. She is still a little jittery about investing in markets and has always felt that markets are like casinos and only for gamblers. If I show her comments from experienced investors her, it will only make her more confident and remove doubts. I look forward to some comments.
Nice picks. I hold Asian Paints and Pidilite from the list
One observation:
Apart from Asian Paints and maybe Nestle, it seems that you have given a miss to most large cap stocks. Considering its a buy and hold portfolio, I think there are many other large caps available which would fit well here. Like TCS, HUL, ITC etc.
Really appreciate your efforts in trying to bring an investor into the equity markets. I have done so with my father and brother
I think Iwill like to point out few things about thethe suggested allocation and investment approach-
1). She wants to be passive investor but to what extent. I would vote against any direct equity investing if no one is going to take care of the portfolio, atleast in 3-6 months or so. Macros change & even business fundamentals do change even for great companies. Why not explore an option of equity mutual fund. Invest in MFs withgood theme like emerging businesses, pharma etc, get decent managers to work for you at 1% fees
2). Flat allocation of 9% to all stocks shows not developing any conviction to any theme/business/stock. Please give deeper thought on what you want to invest on instead of flat allocation.
3). Also just followingadvice of friends one time and deciding on the asset allocation(and not tracking further)is not good enough to invest hard earned money. If she cant track, why cant you do the same if you are active in equity market investing. Or else why not one of the friends that she trusts gives regular advice to her on the portfolio in future.
Sorry, those are critical comments. More constructive once now:
1). Based on the current rally, I would suggest you to do something like an SIP. for e.g. 33% the investment each month for next 3 months
2). Sector wise, I would advice some allocation to pharma and nbfc/ housing finance, which is almost missing here. Specially, pharma rally can be long lasting just like IT has been from many years. Say 4.5 % each to Ajanta, Shilpa, Repco ( should come outhalf each from Cera, Astral, Symphony due to valuation aspects)
Sorry to butt in. (the below is my personal view borne out of strong conviction in investing in direct equities and prior experience with mutual funds)
I think for someone who invests directly into equities and knows a thing or two about investments, its no use investing into MFs.
And besides the stocks selected by him are all top notch companies.
At the most, he can tinker with the allocation to different stocks but overall I see this portfolio comfortably beating most mutual funds hands down.
I am truly impressed with the qualities of the businesses selected. I think at the most she (or you on her behalf) will need to look at things at least twice a year to see how things go.
Hitesh, actuallyi perfectly agree to what you are saying. I have myself exited all MFs, ULIPS (whichwas an Ooops decision…), and am reallyenjoying the fruits…
But some words like Jittery, Casino etc and the need to convince to invest in stock markets makes me feel that she is literally getting dragged into equity investing due to current market scenerio. For such investor, MF isnt a bad idea, even if that gives lesser return then direct investing.
The stocks selected are all ‘A+’ and as you said, once or twice a year review should be good enough.Although I personally believe they are bit too much concentrated on consumer theme & better allocation of capital is possible both from risk and return perspective.
Really appreciate you guys taking the time to post your views. These comments coming from experienced gentlemen such as yourself should really help her build conviction in the merits of stock investing.
Gaurav, I do agree with you. If you look at the big picture, there is definite concentration on the consumer side. I think this can be changed by adding 1 pharma company and 1 other industry stock by replacing 2 consumer names.
I am not certain housing finance companies. I might be completely wrong but I am just not comfortable about how everyone seems to think that this is going to be the next big thing. It looks like despite demand increasing rapidly, competition is heating up equally fiercely Everyday I hear about a new Housing Finance company that I hadn’t heard of before and every NBFC seems to want to get into this space.NIM’s (and asset quality - specially with the weaker players) might not stay intact at today’s levels.
Also, regarding the willingness, and also discipline, I think I will be able to influence her and prevent her from doing any thing silly if the market decides to correct significantly. In other words, it will be my responsibility to ensure shedoesn’tlose the long term outlook.
Do you guys think CARE Ratings or CRISIL would be a better alternative which I can perhaps replace GSK or Symphony with (just for the purpose of diversifying)? What about Mayur or even Avanti as an opportunistic bet? Maybe TCS? I don’t want to have more than 10-11 stocks because I will be the one who will have to guide her and review investments and I won’t have the time to track too many stocks. So need to replace any 2 consumer names with any of the names I have mentioned.
I’m not a senior but thought I’ll shall my experience. I was into equity investments some 20 months back with an all MF portfolio running with 60-65% of my net salary as SIP/month. Then I slowly started investing (even before I knew about VP) in direct equity. I used to see that even with a lot of mistakes, newbie status, less research I was almost able to beat index as well as MF returns on a consistent basis. Now I’m slowly pulling out of MFs (other than in ELSS funds) and investing directly in equities. I don’t think I’m intelligent investor yet but if you a think you know a thing or two, it is better to invest directly.
Coming to your question, I feel TCS is a good bet than CRISIL. Instead of pulling out of GSK or Symphony completely, you can take 5% from GSK and invest in TCS. I own Avanti but feel it requires some attention/tracking (shrimp prices, flood situation, export numbers, disease breakout, etc.) and at Rs 1450 it may not be a clear investment candidate plus there is an inherent risk of a negative black swan event. A solid PF, you may ask her to maintain this way. In all probability will beat index returns hands down. Midcap/smallcap stocks needs regular attention.
