Requesting Guidance: How to Streamline My 40-Stock Portfolio for Long-Term Wealth Creation

Q&A: Questions & Answers
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Dear Fellow Members,

I have been a silent reader and a beneficiary of this wonderful forum for quite some time now. I’m truly grateful for the quality of discussions and insights shared here, which have helped shape my investment thinking post-COVID. Since the pandemic, I’ve spent a good amount of time reading books, business magazines, and learning more about investing principles – primarily with a focus on long-term wealth creation.

Background:

I initially started investing in large caps and index ETFs to keep things simple and safe. However, over time, as I gained confidence and curiosity, I began allocating small amounts across various mid-cap and small-cap stocks.

My Objective:
• Long-term wealth creation (10+ years horizon)

• Aiming for a 50-50 split between large caps and small/mid caps

• Prefer a focused portfolio that is easier to monitor and understand

• Comfortable with volatility as long as the underlying business quality is high

The Challenge:

The current 40-stock portfolio feels a bit scattered and unwieldy. I understand that concentration brings focus, and I’d like to reduce the number of holdings while still keeping diversification

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Request:

I would really appreciate it if senior members and fellow investors could:

• Suggest a good approach to rationalizing this portfolio

• Share frameworks or filters you use to decide which stocks to retain or exit

• Recommend how to balance between large caps and mid/small caps effectively

• Highlight any glaring overlaps or red flags you notice in the portfolio

Thank you in advance for taking the time to go through this. I’m here to learn and improve, and your feedback will be invaluable as I try to structure a more focused, goal-oriented portfolio.

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Before even commenting on your portfolio, I wanted to simply ask. Before picking either and investment fund like MF or even singular stock, what all do you see or analyze tor reach to that decision? Reason I am asking because this helps to share a better insights, which you can relate to.

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It would be really difficult to follow 30 stocks properly
Choose top10 stock
Large cap i believe is for durability then instead choose nifty etf or MF with regular SIP.
Trust me this way you would be able to sideline less convincing ideas
And would be focused on limited companies where you can thoroughly

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Entry price, reputation of company, past returns and recommendations by experts.

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if u are trying to hug the index then seems like an apt PF. Otherwise do a sectoral categorisation and then check %age wise allocations in ur PF. Tweak according to the current themes or future theme according to ur style

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I am not at all qualified enough to give a suggestion - just a thought…

You already invested highest in Nifty50 ETF which in itself has highest allocation to HDFC bank, ICICI Bank & Reliance. Probably, you sell these to allocate that amount to some other high conviction stock in your portfolio?

Next, those stocks which are less than 1% of the Portfolio and if you are not confident to increase it significantly, then you can remove those 5-6 stocks?

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well in my opinion TCS & INFY should not be there together and you have nifty bees also. Similarly you are holding HDFC bank and ICICI bank.

it would be much better if you analyze your portfolio on the basis of sectors and market cap (large cap % small cap % and mid cap %). for example i dont like to hold more many stocks from same sector. I also like to have cap in large mid & small cap holdings.

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That’s great and for you what does reputation of company means is it business quality or performance or anything else?

Entry price is relative even good company with high entry price gives very good return for example you can check page industries, very high entry price, but strong company.

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For me reputation means business quality. Now I’m trying to reduce number of stocks.In fmcg I would keep ITC and Nestle and would exit from HUL and Britannia

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Thank you for guidance. I would planning to shift Niftybees amount to mid and small caps in my portfolio

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Thanks. I’m already in process to rebalance my portfolio.I have not much knowledge yet so taking time. For long term I would keep Infosys in IT and in banks HDFC. Suggestions are welcome

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Planning to sell Nifty bees and increase stake in NCC, VST Industries,JTEKT India ,Bajaj finance and hdfc financial services.

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That’s great to hear, yes business quality matters. For my understanding while objectively defining business quality, what all things you check in a firm.

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I don’t think anyone else can decide the break up of your portfolio since what needs to be included in any one’s portfolio depends on the factors like your age, your financial health as on date, your risk profile, your investment objective and your targeted rate of returns. Having said this, I strongly believe in not having a portfolio of more than 15-20 stocks at the maximum. Depending on the risk profile, I would include more of large cap stocks if one is risk averse but a smaller portion of the portfolio to include medium & small cap stocks. If you are bit aggressive investor, then may be you would include more sotcks from medium & small cap and very less portion to large caps. You want a higher portfolio returns over a period of time, then you may have to include the best performing stocks from those sectors where you can see a good visibility of growth for the next 5-10 years. For example Defense, Railways etc., at present. These are the broad guidelines I can give based on my 4 decades of being in the market.

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