Long Term Equity Portfolio Allocation
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Equity Portfolio : when we talk of Equity portfolio for long term some questions come in our mind :
- How many stocks should we hold in the portfolio ? 10, 20 or 50 . what should be allocation to each stock ? 5% , 10% or 15% or 20% or 50% : As per my experience if you are risk averse holding 30 stocks at equal weightage may ensure safety and consistency , if you are aggressive you may hold even 15 or 20 stocks with allocation ranging from 5% to 7.5% per stocks and even out of 15-20 stocks , Some aggressive investors in value investing give higher allocation of upto 15% to high convincing stock and top 5 stocks having 50% allocation so that when they make they make big in large allocations.
- what category of stocks should we hold ? Large cap , small cap or mid cap : Risk averse investors would like to put large allocation say 50% to large cap , 30% to mid cap and 20% to small cap . Some aggressive investors have 100% allocation to small caps , there are lot of small cap PMS which have 100% allocation to small caps. i have understood risk is everywhere and you would agree even large cap may fall by 50% so when we do long term investing we should invest in companies with the good management , the 25% +growth in business/tailwinds , the moat/differentiation in business , proxy to main growing sectors and the earning proof reflected in previous financials , available at reasonable valuation . i personally have 80% plus allocation in small companies with above qualities for example Borosil Ltd, Thangamayl jewellers , Aartipharma labs, usha mart meet above criteria as per me . i will request to read about these companies through research report , annual report and conference calls .
- When Should we enter the stock ? How long should we hold the stock or what should be stop loss or Target for the stock ? Ideally entry should be in these fundamentally strong stocks when they take support at bullish trendline i,.e when they retrace from 52 week high and find support . There is no change in the thesis thats is no negative news about management or business . i have shared the same in telegram for example Borosil Ltd at Bullish trendline support . As long as the thesis is intact and the stock does not break the bullish trendline you should hold or if you feel the stock is going into bearish territory with clear visibility of DBS with anchor column in 1% or 3% than you may exit and enter at next support or column reversal .
Hope this article was useful .
Note : The stocks mentioned are not recommendations you may do independent research and contact your advisor , i am invested and hence may be biased . i am not sebi registered and the above article is only for learning and education purpose
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Nicely written Thanks
