Part 5: Process or How the heck do I Invest in Equity Successfully?
5.10 Build a Wealth-creating Stocks Portfolio - Part 2
How do you make investment decisions for stocks in your chosen Universe? How do you implement Quality-at-Reasonable-Price way of investing? Are there different ways of doing this depending on investors’ psyche or inclinations?
What works for DIY and Retail investors is Quality-at-Reasonable-Price way of investing. This does not mean there is only one way of doing this.
Based on the differences in how they prefer to invest there are 3 variants of this way of investing.
Best Fair Valued
1. Best Undervalued
Best Undervalued strategy focusses only on very good quality companies that are undervalued or somewhat undervalued. However, these stocks are usually available at lower than their historical valuations during overall market corrections or some stock specific reasons. Both are opportunities for long term investors. The high standard of consistent performance on key parameters required to qualify as a Very Good Quality, Green stock gives the comfort that the chances of buying value traps is limited. However, patience is required to see the strategy play out.
This strategy is best suited for investors who are comfortable going contrarian to the market, prefer paying a price lower than historical valuation and waiting for the tide to turn. When that happens, the returns are likely to be very attractive since it comes with improved company performance and the market re-rating. However, since this cannot be predicted it is critical to have a portfolio and not limit to only a couple of stocks. At the same time if there is authentic news of poor governance it is recommended to exit the stock, as such risks are not factored...........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.
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