A lot has happened in the last 1 year and I believe we all are hoping for the next 1 to be not so eventful or be in a good way.
Equity markets also have had a topsy-turvy ride with wild gyrations ranging from one of the sharpest falls in Mar’20 to one of the quickest recoveries since then.
Surprisingly, we have had a good year and the same is evident from our Model portfolio’s performances. The returns have been decent both in absolute terms and quite good on relative basis considering all the major benchmark indices are down.
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Time and again, we have tried to communicate our philosophy to you all and based on the queries of some of the members in the past few weeks, would like to clarify again:
Old positively rated stocks are as investment worthy as new ones: Since the inception of Katalyst Wealth, I think we have been stressing this that unlike fruits and vegetables, the newness of stock idea doesn’t have anything to do with the goodness of the stock idea.
A positive rating on an old stock idea is no different from a positive rating on a new stock idea; however, for some reason some investors focus only on the new ones.
We share regular updates for the very same reason and the latest ratings account for the most recent stock price along with our outlook as on that date.
Cutting winners too soon and feeding losers – Have observed this in many cases that investors keep on adding to stocks going down without realizing the kind of disproportionate allocation they end up making to those. At the same time, most of the time they are also the ones who end up selling their winners too soon.
In general, the above proves to be the perfect recipe for disastrous portfolio returns.
Getting hyped up about stocks/sectors that have already run up – So, suddenly in the last 1 week alone we have got several requests to come out with a new stock idea specifically from the Pharma space. Now, this is despite the fact that we already have 2 stocks under coverage from the Pharma space which have done incredibly well and have delivered close to 200% and even higher absolute returns in the last few months.
After such a good run up, the requests are somewhat reminiscent of investors asking for housing finance or NBFC stocks a year or two back.
The same pharma stocks were being ignored completely when they were in the dumps in 2017-18.
While individual companies can continue performing well, the hype itself is somewhat scary.
Also, in our view, no matter how good a sector may be performing, one shouldn’t lose sight of sectoral allocation and balanced portfolio approach.
A cricket team full of best batsmen will surely have very bad outcomes.
Top 4-5 stock ideas – Not sure from where has this idea of 4-5 stocks portfolio emerged, but all I can say is we are not comfortable with the same and for variety of reasons find 15-20 to be a good number.
Also, if you still strongly believe in only 4-5 stocks portfolio, please don’t do it on borrowed conviction. You can borrow research but shouldn’t borrow conviction.
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