1.

2 Return Expectations
Stock Investing for Individuals

Profit Making 25-30% of Portfolio

Return Capital as it is 30-35% of Portfolio

Loss Making 30-35% of Portfolio

Out of 20 companies in a portfolio, the top 4-5 will be profit generators. Allow the
winners to grow consistently as they will offset the losses and boost the overall returns
in our portfolio.

Always think about the portfolio’s allocation to different stocks and sectors.
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portfolio it will not generate meaningful results for us. So, we need to keep in mind
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be inappropriate to have such return expectations right from all investments. This does not happen
even for the most sophisticated investors.

We will have a successful investment journey, even if 4 out of 10 investments perform well with time.

NIFTY over the last 10 years has given a

return of 17%.

With a diversified portfolio, at best we can

hope to beat it by 1-2%

Anyone who expects to double their

money in a year, will not survive in stock
market long. The reason is, economics
does not support it. You will depend on
compunding to make really meaningful
returns. And, compounding takes time.
352
1.3 Portfolio Attribution
Portfolio Attribution refers to identifying the sources of our gains and losses. Institutional investors

Stock Investing for Individuals

conduct portfolio attribution regularly and it is suggested that retail investors should do the same.
In a rather simple manner. The process takes around 30 minutes and should be done once in every
six months.

What is the net gain/loss that we have on our position so far? As per the table there was a 14% net
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Stock Net Gain/Loss % of Portfolio Gain/Loss in

Portfolio

Reliance Ltd +14% 5% +0.7%

HDFC Bank Ltd. -8% 7% -0.56%

Dr. Reddy’s -20% 8% -1.6%

BHEL Ltd. +16% 3% +0.48%

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Examine the net gain/loss situation for each company in the portfolio and repeat it for
each stock. Thus portfolio attribution gives us a lot of insights about where our profits
and losses are coming from. We can do this at Industry level too.

Whenever you are adding a stock -

Think Portfolio
Factors to look for

Diversification Relation to other Hedging

At the time of buying/selling
stocks think about the other
stocks in your portfolio too.
portfolio companies
Make sure that you avoid
related companies that
are operating in the same
industry. If the company in
question is related to others,
such as HDFC Bank and
Kotak Bank, avoid including
both them in the portfolio.
We will hedge our risks by
buying small quantities
of both private and public
banks as we are unsure
about them. In such a
way we can hedge EV and
traditional automobile
makers : traditional brokers
like Motilal Oswal and
discount brokers.

Depending on how each stock performs, we will balance our portfolio in future.
But its very important to think of the entire portfolio and not one stock. 353