I was expecting that you will talk about how many stocks we should keep in portfolio? what are the effects of less stocks as well as more stocks? Statisticians claim , risk gets diversified at 25 stocks, beyond that it doesnot benefit. But again Statisticians have not given enough thoughts about how individual stocks are co-related with each other, so their independence is not properly judged and quantified. Even within a single company, there might be many products of different nature which may provide much needed diversification. Just think of Reliance..It has 7-8 sectors under just one company...so Can it be a proxy to 7-8 sectors diversification? also warren and Charlie recommend 5-6 stocks, even Fisher says so..They call investors who invest more than that as Fools...But can we really know the company inside out? In the name of research we can read annual reports, listen to concalls, read rating agency reports and watch management interviews and other investor interviews....Beyond this , what we can do? can we get inside the Boardroom of directors and listen to what directors are discussing? So really I hope you dwelve more into Portfolio construction....First you need to identify prominent sectors which are important for Indian economy...and we need to invest in those sectors at all times...Then you need to idebtify leaders in those sectors and then arrive at number of stocks...i expect a lot from you...please oblige....
I was expecting that you will talk about how many stocks we should keep in portfolio? what are the effects of less stocks as well as more stocks? Statisticians claim , risk gets diversified at 25 stocks, beyond that it doesnot benefit. But again Statisticians have not given enough thoughts about how individual stocks are co-related with each other, so their independence is not properly judged and quantified. Even within a single company, there might be many products of different nature which may provide much needed diversification. Just think of Reliance..It has 7-8 sectors under just one company...so Can it be a proxy to 7-8 sectors diversification? also warren and Charlie recommend 5-6 stocks, even Fisher says so..They call investors who invest more than that as Fools...But can we really know the company inside out? In the name of research we can read annual reports, listen to concalls, read rating agency reports and watch management interviews and other investor interviews....Beyond this , what we can do? can we get inside the Boardroom of directors and listen to what directors are discussing? So really I hope you dwelve more into Portfolio construction....First you need to identify prominent sectors which are important for Indian economy...and we need to invest in those sectors at all times...Then you need to idebtify leaders in those sectors and then arrive at number of stocks...i expect a lot from you...please oblige....
My investing experience is precisely articulated.
Assume there are 50 coffee can stocks. Assume they all give 15% type of returns.
1st person: Buys all of them. She end up with diversification.
2nd person: Buys 10 of them. She end up with concentration.
Both get the same returns.
Cutting through the fluff. Crisp and insightful.