While selecting itself, you need to be extra catious. And even after selecting, you need to keep a very close watch on all sorts of news and financial and business performances. Yes bank is something, which is beyond anybody’s control.
The basic idea is to achieve true diversification such that no two companies intersect each other in any way, whether business segment, sector or even geographic situation. Just for example you have put lets say 5 % each into TCS, Infosys, HCL and LTI…then 20% of your portoflio is exposed to the inflationary pressures of US and business slowdown will affect 20% of your portfolio.
Similarly if you are having duplicacy in other sectors like Pharma or Banks, your major portion will be affected by similar geo political situations. You may be under impression that by investing into 20 -25 companies, you are well diversified, but in reality, they may be affected in much the same manner and not exclusive to each other.
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