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Equity Buff
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Joined: 30/Aug/2006
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   Topic: Diversified vs Concentrated Portfolios..
Posted: 17/Sep/2006 at 9:31am |
Dear Basant,
In DNA money supplement Dt. Sept 15th, Mr. Anoop Bhaskar fund manager of the best performing Equity fund in India this year Sundram BNP Paribas Select Mid Cap fund has 104 stocks in his fund, more than double the number held by his closet rivals. He has said in the interview that "you have to diversify your portfolio, especially when investing in Mid Cap companies".
In the same article Mr. Suresh Soni, fund manager of DWS Alpha Equity Fund, the fourth best performing equity fund this year says" Its always nice to spice up your portfolio with some mid caps in the hope of higher returns but I would stick to large caps for our bread and butter".
Would like your views on Concentrated portfolios versus diversified portfolios and also if you could post any results of studies which may have been done on concentration versus diversification.
Rgds
Equity Buff
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Vivek Sukhani
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Joined: 23/Jul/2006
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Posted: 18/Sep/2006 at 7:47pm |
Basant has a study on diversification and risk management.He has studied, how many scrips lead to how much risk avoidance.
Diversification, if suitably applied does help in conservation of wealth but even there you need to have some sort of a concentration, else you will become an index and never be an outperformer.But here I would like to tell you 1 thing... while trying to conserve wealth, you may end up with more wealth most of the times.... thats whatsurprises me!!!!Thats because, while trying to conserve, you adopt such rigid formats and standards that you end up having creme de la creme and which more often than not surprise you quite positively.
Basant, will be glad if you can re-post that original post of yours. Even I was searching for it, but was not able to locate it.
Vivek
Edited by Vivek Sukhani - 18/Sep/2006 at 7:48pm
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Equity Buff
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Posted: 18/Sep/2006 at 8:16pm |
Dear Vivek,
Thanks for your post.
The debate is not only about Diversification or Concentration but also about whether Mid Caps should form a majority of ones portfolio(high %age of total invested amount in Mid caps) and also whether one should have a concentrated or diversified portfolio in Mid caps or should majority of ones portfolio be mainly Large caps with some Mid Caps thrown in for a kicker ?
As we know chances of getting a serious multibagger are in small & mid caps.
Rgds
Equity Buff
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Vivek Sukhani
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Joined: 23/Jul/2006
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Posted: 18/Sep/2006 at 8:47pm |
I fully endorse your views.However, while loading mid-caps you have to be extremely choosy.Also, while choosing mid-caps instead of the top-down approach, bottom-up approach is far more advisable.Also, the mid-caps which throw up the maximum surprise are the one which belong to the out-of-favour sector.In short, playing mid-caps demand you to be a grater contrarion than while you are playing large caps.
I am myself a very big devotee of mid-caps.I also agree, there wo;; a;ways be more valye in mid-caps and you will have more bang for your buck in mid-caps.However, if inappropriately chosen, your portfolio can get banged.
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Equity Buff
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Posted: 18/Sep/2006 at 9:44pm |
Dear Basant,
Will appreciate your views on my 2 posts on this subject. Also kindly repost your earlier post which Vivek is refering to in his post.
Thanks.
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basant
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Joined: 01/Jan/2006
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Posted: 18/Sep/2006 at 9:53pm |
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Sure just been really tied up with something would do it absolutely. Sorry..
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'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
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Equity Buff
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Posted: 18/Sep/2006 at 10:01pm |
Many thanks Basant. Pls take your time.
Rgds.
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Ajith
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Joined: 06/Aug/2006
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Posted: 18/Sep/2006 at 10:49pm |
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Buffet advises a concentrated portfolio but that is only for those with superior abilty and those choosing syocks with sustainable competitive advantage at a discounted valuation and with a very longterm approach and thats not easy.For lesser mortals ,those choosing midcaps which will hopefully become large caps a larger portfolio which can be pruned later may be the better option.
Edited by Ajith - 18/Sep/2006 at 10:50pm
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Ajith
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