On considering all the sources of risk, I concur with Amit’s (@jamit05) opinion.
Among all the sources of risk for an equity investor, some need to be addressed at the portfolio level and the rest at the individual position level:
Below ones shall be planned at the portfolio level:
- Correlation
- Concentration
- Liquidity
- Leverage
Below ones shall be planned at the individual position level:
- Quality: Due to any or all of these factors - Balance sheet, the longevity of the business, management’s integrity, and qualitative and quantitative disclosure. However, this can be relaxed if the price paid reflects excessive pessimism and one holds multiple such positions in the portfolio.
- Volatility: Driven chiefly by external factors that are uncontrollable - Investor sentiments, Interest Rates, Inflation. Maybe less than 5% company-specific factors. If risks at the portfolio level are well addressed this must be welcomed as an opportunity to buy more when the sale starts.
- Valuation: If paid too much, one may panic and capitulate during stressful market environments.
@valuestudent: Sorry I barged into your thread. DM me in case I need to paint it white.
| Subscribe To Our Free Newsletter |
