Portfolio Building Strategy::Need advice

Q&A: Questions & Answers Portfolio Q&A
1

Hello All,

This is my first post in VP. I am a software engineer by profession [age 29] , a naive to stock market and recently came to know about VP when I read an article in FB about Mr. Donald and Mr. Ayush Mittal.

I have been following the posts [at least 30 min a day]. Honestly I found a lot of knowledge and hard work by the members.

I need a small help from all the experts and VP members. I want to build my portfolio but have 2 major limitations.

  1. Not enough knowledge on valuations and understanding balance sheets
  2. Cant scrutinize markets on daily basis.

So can any guide me on what to start reading. Basically want to build a portfolio for a long term [ 10-12 years] and revisit them may be on quarter basis not daily.

Also based on what I read so far, apart from understanding the company profile I observed that whenever people buy stocks they look out for:-

  1. PE [ depending upon the sector, so pharma and FMCG stocks would have high PE]
  2. ROE [ ~ 20 % consistent for 10 years
  3. ROCE
  4. Debt to Equity Ratio [ again depending on sector , banking and financial lending stocks would have high DE]
  5. Promoter Holding :- not good if less than 30 %

If I consider the above 5 ratios , then I don’t think its right time to buy stocks like
Eicher Motors
Sun Pharma
Mayur Uniquoters
Page Ind
GRUH
Kitex
Kewal Kiran Clothing
Torrent Pharma
Symphony
TCS
HUL
etc

I am confused what to do. I am sorry If this post irritates you , I just want to explore and learn from your valuable experiences.

Thanks for your patience.

Regards,
Sunny

1 Like
2

Welcome to VP sunny.

Coming to your question, the answer may be different for everyone, depending on an individual’s investing practice.

Considering your readiness to commit to long term investing practice, you can enter at any stage. In the long term, with a good portfolio, you’ll make good returns.

My advise will be to try dummy/paper trading first. Then invest actual money as you gain confidence.

1 Like
3

Hi sunny.
Looking at your 5 ratios, you are already of to a good start.

I too started my education by reading books on the stock market . I have read a few great ones and lots of duds in between. Now I wish I had read started up only with these three,in the folliwing order all by Peter lynch.

  1. Learn to earn
  2. One up on wall street
  3. Beating the street.

Learn to earn - covers the basics of the stock market & investing in general. It has a section on balance sheet basics and PL ,cash flow all explained in simple terms.

One up on wall street- Easily his best book. Will help you to form a framework for analysing stocks. Most importantly it gives you the confidence that ‘you the new investor can do it’

Beating the street - a good follow up with more importance on number crunching, case study type examples .

Hope it helps :smile: )

I personally feel taking a small real dive into stocks will help in quickening up the learning process.

Good luck.

3 Likes
4

Having skin in the game has helped accelerate my learning also.

5

I think, there should always be real money in the game.
In this Game, GREED & FEAR are the only 2 driving forces.
If you have fake money. You get fake lessons which will only give you fake experiences.

In the end, your lessons are not worth

So, I rather ask you to start with small corpus, may me tiny corpus. Say 1/5th of your 1 month salary.

6

My suggestion would be to think in terms of size of opportunity against each of your possible choices and visualize where you see them 3-5 yrs down the line using whatever logic/reasoning you think/relate to from whatever sources be it Annual Report, industry growth etc.Hopefully that shud give you confidence and conviction to hold them

Narrow down the list to your preferred no of stocks and look to buy them in SIP manner of your desired qty and follow them regularly

7

@idikasony @FocObs, @Lynchfan, @chintans Thanks all for your valuable advice.

As suggested I am going to take a small dive by making actual investment but of a smaller size.

I have also shortlisted few stocks but one thing that comes to my mind is is the price justified. I mean whatever stocks I have shortlisted , they have high PE or are X time [ X between 10 and 20].

So now my mind is divided into:-

  1. EITHER, I wait till their price is corrected [ uncertain what time will it take to come down]
  2. OR go ahead in SIP way since I would be holding it for a long time.

Ppl, please suggests what shd be the efficient if not the best approach would be.

Again many thanks to you all

Cheers,
Sunny

8

sunny,

Warren Buffet has remarked few times that if he is teaching investing then he will only teach these two things:

  1. How to do valuation and
  2. How to think about the market prices.

I think these two are the keys to stock investing. I wold urge you to focus on these two aspects as you learn and develop your skills.

Good luck and Happy Investing!

9

Dear Sunny,

  1. The high PE or ‘how much to pay for quality ?’ Is a question which puzzles me every day. It varies from stock to stock. Its better to take a decision based on every individual stocks earnings visibility.

  2. Yes SIP mode is the best way to start.

Thank you.

1 Like