Portfolio construction -CONCENTRATED? OR DIVERSIFIED ?Which is better for multi bagger returns ?

Portfolio size has been a conundrum for me , prticularly when outlook is long term for multibagger returns and in view of my reluctance for activity. I have read in this forum that one our member Mr Parin Gala keeps only 4 stocks in his portfolio . How does he do it ? What is his selection process?Focusing on what esstials to think of long term safety and multibagger returns ? I have been struggling to find satisfactory answers to these guestions since I read about Mr Gala's portfolio size. Learned members are requested to help me in this regard.

 

I think only expert and knowledgeable investors can try this It is VERY Dangerous for normal investors to try such things. If you get stock wrong your portfolio is finished. Also in India we can easily find 20 or 30 mid caps which are good stocks Growing at 20% cagr so why take risk? IMHO there should be max cap of 5% for stock and 20% for sector then our stock portfolio is bullet proof

 

There was article in main site of how even expert investors like dolly khan a, kedia vijay a shish kacholia and others have diversified portfolios of 20 or 30 stocks then why we should take risk?

 

My query is- How can we do it, if we like? As an academic exercise we can attempt to think about parameters to be considered in investment process for concentrated portfolio.We can increase .the no. to 10 from 4.How does Mr Gala do it and what has been his experience.? I dont believe in doing what Dolly khanna or Kedia is doing. No disrespect meant to you.I believe this discussion will help us evolve further in investments.

 

Having concentrated or diversified portfolio is a matter of one's financial goals (by what time the person wants to accumulate how much wealth) and personality (whether the person is a risk taker or a conservative person).

A person should go for concentrated or diversified portfolio according to his own risk appetite and aggression level. And according to his level of understanding of the markets and the particular stocks.

Concentrated portfolio can make you extremely rich in a very limited period of time but there is no scope/place for mistakes. Mistake makers get punished very severely. It is only for those who understand the markets and the particular stocks very deeply.

Diversified portfolio gives you lesser returns since the returns from multibaggers get diluted with the ones which perform lesser. But mistakes/ misjudgements in certain stocks are easily covered by other stocks. It is quite damage proof.

An investor himself has to take the decision which method to follow.

 

Thanks. But what parameters help you to foresee future multibagger returns? How much is risk you are brave enough to take ; what is the risk reward ratio . How much has been your success? Would you be kind enough to share your exprience by giving atleast one your success story which has made you to opt for this uncommon investment style

 

i usually prefer a nice spread of stock 40+ but this year i opened a seperate account and tried a concentrated portfolio of turnaround stock to see how it works out..my pics were
Spicejet@21
Suzlon@21
Future Consumer@ 17
Tamil Nadu Petro@19

My aim was that even if anyone fires, i will not be at a lost. And well spicejet went 3.5 times, future 70% and rest two stuck where they are so...was quite a good experiment...but i still will avoid a concentrated one..its for champions not novices..