Part 5: Process or How the heck do I Invest in Equity Successfully?
5.9 Build a Wealth-creating Stocks Portfolio - Part 1
How do you build a portfolio that will deliver high compounding returns but keep risk at a manageable level? Do companies perform differently in different economic and market cycles? How can you use this to build your portfolio? How do you set your criteria to identify opportunities to do this effectively over time? What is required to build a large-size portfolio with confidence?
Quality-at-Reasonable-Price is the Investing Process that we recommend. It is the most suitable for retail investors and all DIY investors and you have seen the reasons why. You have also seen how to answer the 3 essential questions before you invest in a stock. Now, how do you build your portfolio using all that you have learnt, because the asset that is going to take you to your goal of financial freedom is your portfolio, more specifically your equity portfolio.
Choosing the First Gate in the Investment Opportunity Management System
The first gate is about selecting the universe of stocks you are interested in. There are 5000+ listed stocks and all you need is 25 to 30 in your portfolio. The first gate serves a different purpose from the subsequent QVPT-Quality, Valuation and Price Trend gates and this is critical to building your stock portfolio.
This is apparent from the preferences investor show. Some are very conservative and invest only in safe large cap stocks: they maybe sacrificing potentially higher returns even when they need it to reach their goals. Others are aggressive and invest predominantly in small cap stocks to earn higher returns and suffer pangs of anxiety when the market corrects. It does not have to be an either-or choice and that is achieved by selecting the first Gate wisely.
Stocks exhibit a difference in how much returns they deliver and how volatile (price fluctuations) they are. After much...........Read More
Warning: Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Disclaimer: Registration granted by SEBI, membership of BASL (in case of IAs) and certification from NISM in no way guarantee performance of the intermediary or provides any assurance of returns to investors.
MoneyWorks4Me method for rating and ranking mutual funds for SIP
MoneyWorks4Me rating and ranking of funds for SIP is available to subscribers only. Moneyworks4Me is not a rating and
ranking agency, however it is required that users have a way of selecting funds and building a Portfolio. The method used by it are described below to enable users to understand the logic behind the rating and ranking Subscriber will find more details on this in the
various content made available from time to time. In case you need more please write to besafe@moneyworks4Me.com
MoneyWorks4Me rates and ranks mutual funds based on the following data-driven system:
Performance Consistency: This is measure based on whether the fund has beaten the benchmark index consistently. For
this we compare the 3-year rolling returns of the fund with the benchmark for a minimum of 5 years and preferable 10
years. The period of rolling is one month and holding period is 3 years. Fund are color-coded Green on Performance when
the fund beats the benchmark more than 90% of the time. It is Orange if it beats 80% to 90% of the time and Red if less
than 80%. Funds with less than 5 year data are color-coded Grey.
Quality of Portfolio Holding: Moneyworks4Me has color-coded stocks as Green, Orange and Red based on whether the
company's performance has generated a ROCE above a threshold level (cost of capital) over 10 years (minimum 6 years) and
generated positive Free Cash Flow. For Banks it checks whether ROE is greater than 15% and sales has grown over previous
year. Stocks that perform consistently on these combined metrics are color-coded Green (min score 14 out of 20), Orange
(between 8 and 14) and Red (less than 8 out of 20).
Fund are color-coded Green provided the portfolio has 70% holding in Green stocks but not more than 10% in Red stocks.
Funds with more than 15% Red stocks in the portfolio are color-coded Red. The rest are Orange funds
Funds ranking in screeners: Performance Consistency and Quality are two parameters used for ranking funds for SIP. The
ranking as follows GG, GO, GR, OG, OO, OR, RG, RO and RR.
With the same color-coded funds, the one with the higher Average 3-year rolling returns (over 5 to 10 years), the number
that appears in the Performance tag, ranks higher.
Here is the summary:
The third tag Upside Potential is not relevant for SIP. It is relevant for lumpsum investments in Mutual Funds.
Looking to make the most of market corrections and volatility?
Did you know that market corrections can actually present great opportunities to buy high-quality stocks at discounted prices? By taking advantage of these times of volatility, you can position your portfolio for long-term growth.
At MoneyWorks4me Portfolio Advisory, we specialize in helping investors navigate market fluctuations and build a strong, diversified portfolio. With our collaborative approach, you can maintain control over your investments while benefiting from our expertise and guidance.
If you're interested in learning more and with a minimum portfolio size of 25 L+, we can help you manage your portfolio, no matter the size. let's connect and discuss how we can work together. And as a bonus, we're offering a FREE Portfolio Review using our "Portfolio Manager" tool during our conversation.
So why wait?
Let's get started today and take your portfolio to the next level!
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