Before we start, let me mention that I have already read the Wiki and fee only advisers have told me that they do not recommend mutual funds/stocks to invest (they can only help with % allocation).
My current portfolio:
Vehicle
Category/Sector
Name
Mutual fund
Direct - Growth
ICICI Prudential NASDAQ 100 Index Fund
Direct - Growth
Motilal Oswal Nifty 50 Index Fund
Stocks
FMCG
ITC
FMCG
Godrej consumer
BFSI
SBI
BFSI
L&T Finance
Pharmaceuticals
Cipla
Pharmaceuticals
Sun pharmaceuticals
Others
BHEL
Others
Coal India
Others
IOC
Others
ONGC
Others
Hindalco
Others
Sumitomo chemicals
Others
Jubilant Food Works
Others
Maruti
Others
NECC
A few facts:
I know I have a lot of stocks which is unhealthy. I haven't touched my portfolio since 3 to 5 years.
I want to invest in following sectors
FMCG
BFSI
Pharmaceuticals
Technology
I want to invest for a long term horizon (20 years).
My goal is wealth creation/retirement.
My ask:
Are my mutual funds sensible given that I want to cover local and global market with top companies? My mental model is that only the high performing companies will be in the list and low performing will be replaced. So the markets will always go up and my fund value will increase.
Which stocks should I get rid of? I don't care of dividends as they are marginal anyway.
Which stocks should I continue holding?
Which stocks should I add?
In general, for #2, #3, and #4, I want to understand what are the key metrics I should look for while determining a company to invest in? While I know P/G ration, Debt to income ratio, etc. exist but I get overwhelmed with suggestions every time.
@mexican30 One other reason is that it reduces the risk of being not informed enough to know when to enter/exit individual stocks.
I know I don't know enough or have enough time to educate myself in depth for various industries, keep myself up to date on events and understand their implications to industries or specific companies, nor do I have the network to know stuff that's not reported broadly/at all. That's a guarantee for me to make terrible decisions and lose money more often than not.
Sticking to a fund has others with (hopefully) more experience make transactional decisions. And I prefer index funds simply because it's easier in my mind to bet on the overall market (or a significant subset of it, depending on what you choose) than any other specific theme.
@mexican30 100% if your equity investment should be in Index funds. There is no reason why you should invest in other MF which basically dont outperform Index consistently and anyways are playing catch-up with index returns. Also with other MF,s expense ratio is something you need to pay attention. Its the % loss you get hit with every year no matter what. + If a fund manager is changed there is no assurance that the MF will continue doing well.
Lets say for all your MFs the combined expense ratio is 1.75% and assuming you invest for say 10 years then you are losing out 16% of your portfolio over 10 years.
Thats a huge hit you are getting for no reason and without any guarantee that it will outperform index. Would you not be happy to get 16% in your pocket and get whatever returns Index is giving ?
Dont let greed overpower you.
Unless you know how to read balance sheet, understand the business completely, know which things impact the business then go pick your own stocks and invest in them.
I can assure you that most of the people dont any of the above things. Hence Index funds is best way. Its boring but simple.
@mexican30 No. Nifty 50 Index is all you need. That is what runs the India. Rest is bullshit that you can ignore.
If you really care about further diversification consider investing in US Index funds, max 5% in Mid cap Index fund.
Small cap is total shit in my opinion and not worth it.
My personal take is 75% nifty index + 20% US index and 5% Mid cap index
