My Portfolio - looking forward for your feedback

Wow, this looks like a high-conviction concentrated portfolio.

The portfolio is nicely balanced with a representative each from the banking, info-tech, auto (I assume the ‘TVS’ is ‘TVS Motor’) and Pharma.

All four sectors are expected to show secular growth in the future as well.

The big risk of a concentrated portfolio is that there is no margin for error. If one stock goes bad, it can take the entire portfolio down with it.

That is why experts advice that a concentrated portfolio should only constitute of ‘market leaders’ with a strong and established business model and a management with a proven track record of several years.

Your choice of stocks in TVS Motors (assuming it is that), Astec and Nectar requires careful evaluation from that perspective.

Morgan Stanley has recently given five reasons why TVS Motors is not a good buy. “We believe Q4FY15 will mark the start of the earnings downgrade cycle for TVS and given premium valuations, we remain UW” it said.

A number of other experts have addressed the same concern about TVS Motors’ valuations. They may all be wrong but the question is whether you can afford to take the risk with a 25% portfolio allocation.

Both Pharma stocks, Astec and Nectar, are micro-caps, with a bit of debt in their books. While they are doing well and are expected to do well, the question again is about your risk tolerance.

As micro-caps, they can be highly volatile and can easily shed large percentages of their market value in a short time. This can play havoc with your portfolio.

So, I suggest you carefully evaluate your risk tolerance and ask whether you can tolerate sudden and steep downward swings. If no, it may be a sensible idea to diversify a bit and invest in more established stocks.