This is an analysis of my stocks portfolio which has so far fetched a total absolute return of 22.58% (including dividends). Before we begin, several caveats and considerations are necessary.
(1) The stock portfolio is about 16.5% of my equity mutual fund retirement portfolio; (2) The portfolio is relatively young and both the absolute returns of 22.58% and the CAGR of 33.35% should not be taken too seriously; (3) Technically the portfolio was started on Oct 2014; however, 58% of the total transactions made and 71% of the total capital is less than a year old; (4) No transactions were made in the dip – that is during the March 2020 fall. (5) These stock investments are in addition to my regular goal-based mutual fund investments.
The returns that you see is simply the residue of luck. It has nothing to do with my stock picking abilities. If anything, it shows a lazy approach to stock selection has so far done reasonably well. Both the reader must and writer must keep in mind that the portfolio is being evaluated during a time when the market has zoomed up. The real test would be with age and during an extended side-ways market.
Stock picking strategy
Cartoon depicting how readers analyse my stock portfolio more than I do!
Choose stocks with little or no evaluation or analysis
Choose low volatile stocks with good financial health (low debt min requirement)
Do not be afraid to pick expensive stocks – both in absolute price and valuation. Note: Value investing may sound intelligent and enticing but it is essentially riskier. I neither have the age to take on such a risk, nor the qualitative insights to pick stocks that the market has shunned but will be discovered sooner than later. To appreciate the risk associated with value investing and why it is more qualitative than quantitative, see this analysis: Is it time to exit ICICI Value Discovery & Quantum Long Term Equity?
When in doubt, ask your wife when she is just about to fall asleep in the afternoon.
Do not fear dividends (or rather dividend taxation): I had (extremely) small exposures to (only) dividend payers like IOC and CoalIndia; Have no problem with such stocks; I removed them only to trim down the portfolio and exploit their capital losses – offset them with rebalancing gains from my son’s portfolio.
What matters primarily is company health. Whether it is a dividend payer or not is incidental. That is, it makes no sense to say no to a company only because it pays huge dividends! Just as it makes no sense to sell a stock because it has increased dividend payout.
All stock investors over a period of 10 plus years, whether they like it not, will receive dividends. There is no choice, unlike mutual funds.
Dividends are not something “extra” in terms of returns/performance but do represent real profit. For an older investor, it can serve as a source of income: How to build the ideal retirement portfolio
Peaceful sleep is the best form of realised gains: hence the importance to business health, low volatility, reasonable momentum (not all stocks in my portfolio will check all these boxes).
simplywall.st I use their paid investor plan to use their screener and unlimited reports but the free plan may suffice for many. The site has a simple, easy to understand snowflake depiction of stock health, dividends, valuation, past profits and future projections. This is their GitHub stock analysis page
An overview of the snowflake chart of my portfolio is shown below. All of them have good health; some with a good past; some with a good dividend record etc.
My stock portfolio analysis total return 22.58 per cent up to Dec 2020
Portfolio Returns
The current weight, average holding age in years and the total return (absolute return including dividends) is tabulated below.
Total
Avg Years
Total Return
Weight
HINDUNILVR
1.575
33%
18.96%
ASIANPAINT
0.59
36.25%
17.25%
TCS
0.31
13.23%
13.50%
HDFCBANK
1.58
108%
11.13%
INFY
0.4
22.85%
9.96%
PIDILITIND
0.57
19.60%
9.80%
DABUR
1.21
9%
8.68%
COLPAL
1.985
41%
5.25%
ITC
0.64
6.45%
3.98%
MARICO
0.65
11.61%
1.18%
WIPRO
1.19
36.87%
0.31%
COALINDIA
1.24
-25.55%
Sold
GODREJCP
0.94
-4.50%
Sold
HINDPETRO
1.46
-14.66%
Sold
IOC
1.11
-26.50%
Sold
VEDL
1.5
-19.16%
Sold
Overall performance
The average portfolio age is only 0.71 years. This means the CAGR mentioned below is merely eye candy. The dividend returns are before tax.
Total Return
CAGR
From CG
21.40%
31.55%
Dividends
1.17%
1.80%
Total
22.58%
33.35%
Avg Years
0.71 years
These numbers are expected to sharply come down as the portfolio ages. I view this stock portfolio as a form of low volatility index investing.
Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitteror Linkedinor YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation for promoting unbiased, commission-free investment advice.Use our Robo-advisory Excel Template for a start-to-finish financial plan! Now with a new demo video!⇐More than 1000 investors and advisors use this!Our flagship course!Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions!⇐More than 2800 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.Our new course!Increase your income by getting people to pay for your skills!⇐More than 675 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos! My new book for kids: “Chinchu gets a superpower!” is now available!Both boy and girl version covers of Chinchu gets a superpower. Most investor problems can be traced to a lack of informed decision making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, if we had to groom one ability in our children that is key not only to money management and investing but for any aspect of life, what would it be? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parent’s plan for it and teach him several key ideas of decision making and money management is the narrative. What readers say!Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
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Published by CNBC TV18, this book is meant to help you ask the right questions, seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You WantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.
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Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or Linkedin or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation for promoting unbiased, commission-free investment advice.
Published by CNBC TV18, this book is meant to help you ask the right questions, seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.
This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)