I tweeted this yesterday –

I maintain my fairness investing easy –

1. Prime quality + easy companies solely
2. Hardly ever purchase, very very very hardly ever promote
3. Equal sizing of positions at value
4. <15 shares + <3 MFs
5. No AGMs, no concalls, solely annual studies

Has labored very well for me for the previous 18+ years.

— safalniveshak.com (@safalniveshak) May 26, 2021

The response the tweet acquired was past my expectations. Check out the tweet, quite a lot of questions individuals requested, and my responses. Hope they’re of some assist to you.

Here’s a little clarification on every level –

1. Prime quality + easy companies solely
Here’s what I imply by top quality (blue and inexperienced containers are the place I keep) –

Aside from good ROCE, revenue progress, clear stability sheet, and good cash-generating capability, I’m additionally on the lookout for a enterprise that sells easy stuff, the character of which isn’t prone to change drastically over the subsequent few a long time (however who is aware of!), and which additionally has a superb progress runway forward. Plus, the administration has a superb capital allocation monitor file and scores excessive on the integrity entrance. I shouldn’t have the center or the intelligence to put money into ‘potential’ turnarounds or cyclical companies. I keep away from industries that I don’t perceive a lot – pharma, banking and finance, commodities – or enterprise homes I don’t belief a lot.

I don’t put a lot weight on market capitalization whereas selecting shares (have a mixture of giant, mid and small caps in my portfolio), besides that I keep away from penny shares or these with low capitalization (like lower than Rs 500 crore). Once more, it’s a matter of non-public consolation.

2. Hardly ever purchase, very very very hardly ever promote
I preserve a watchlist of shares, which is essentially a results of this course of –

I purchase shares solely after I discover alternatives at valuations I’m keen to pay. And after I say I purchase shares ‘hardly ever,’ such alternatives anyhow don’t come typically. So the final time I purchased quite a lot of shares (principally from amongst my current holdings) was in March-April 2020. After which there was an extended interval of inactivity.

So far as promoting is anxious, I attempt to decide shares that I’d not need to promote, even after they turn out to be what individuals name ‘overpriced.’ Until a enterprise continues to face good on my high quality parameters, I proceed to carry. Else, when a inventory turns into a big a part of my portfolio (like greater than 20%, I promote an element for rebalancing function). Right here is my promoting guidelines anyhow –

3. Equal sizing of positions at value
That is additionally a results of my want for preserving issues quite simple. I attempt to maintain a most of 15 shares in my portfolio and so the purpose is to have no more than 6-7% of the whole portfolio (which is 100% divided by 15 shares) in every inventory at value (when I’m shopping for a inventory). Some shares can go to 8-10% at value, however these are uncommon.

Bear in mind, I’m speaking about equal sizing on the ‘value’ stage and never the ‘present worth’ stage. My 6-7% holding at value might develop to 15-20% and due to that another holdings might come all the way down to 4-5%, however that’s not what I’m monitoring.

I agree that place sizing – which includes allocating capital as per your conviction with every concept – is a essential element of investing, however that’s when you’re doing it professionally or are full-time into it. Equal sizing – not worrying about particular person positions, however guaranteeing that every inventory concept is value having within the portfolio – has labored effectively for me, and so that’s what I proceed with.

4.
That is straightforward, and is once more a results of my must maintain issues easy. I’ve gone to 16-17 shares generally, however have principally saved it beneath 15. With two human youngsters and a pet at residence, I discover it troublesome to handle greater than 15 extra loopy ones in my portfolio. 🙂

As for the mutual funds, once more I attempt to maintain the listing small. One of many three funds is an ELSS (for tax-saving function) and the opposite two are diversified fairness schemes. Mutual funds are round 10% of my fairness portfolio, and I take advantage of them as a diversification instrument (like worldwide shares, smarter individuals managing part of my financial savings, and many others.).

5. No AGMs, no concalls, solely annual studies
One, I’m lazy sufficient to attend AGMs and convention calls. Two, I’ve been there accomplished that for the primary eight years of my funding profession – whereas engaged on a job – and discover not a lot incremental worth in these occasions and actions. Third, for the type of companies I need to personal, annual studies do a good sufficient job. Fourth, I’ve additionally set Google Alerts for corporations in my portfolio and watchlist and so if there is a vital, significant information on them, I obtain them anyhow.

This isn’t to say that AGMs and convention calls should not necessary. They might be for you. For me, annual studies are sufficient.

Wait, What’s My CAGR?
Properly, what I simply described above has labored very well for me for the previous 18+ years. And this has helped me earn sufficient to pay all my liabilities, stop my job, work on issues I really like, hardly ever “work,” spend time with my family members with out worrying the place the subsequent paycheque will come from, have 55388 unread emails in my inbox and nonetheless get away with it (although I sincerely apologize to these whose emails I’ve not answered but), and freely write this put up (with a cheeky headline) with out the guilt of something in it being made-up, as a result of nothing is.

Now, who cares about CAGRs anyhow?

Investing, my pricey pal, is a really private and lonely affair. I take pleasure in this loneliness – solitude – and in addition the simplicity that enables me to give attention to extra necessary issues in life. That is ‘my’ manner of doing issues.

Your manner is your manner. If you already know what you’re doing, do it. With none guilt.

No person cares. In a number of years, even you received’t.

So, play your half and revel in until it lasts.

* * *
That’s about it from me for right now.

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Keep protected.

Till subsequent time,
Vishal