I am in position to guide, as my little knowledge and experience are insufficient. I can share my thoughts though, as always.
Why do we want to invest in so many sectors in the first place? Do we want to invest in a few good companies irrespective of the sectors they are present in, young or old, mid or small, or do we want to spread our wings covering 10 sectors?
What are we trying to achieve here, are we looking at compounding, or stable returns, or low probability of capital loss etc? No overlapping between companies is one thing and diversification for the sake of diversification is another, because if sector rotation happens, the part of allotment to some sectors may not yield any returns for an extended period of time, unless they pay good dividend. I have read this comment that investors sometimes rush to a sector, a stock when other sectors don’t perform, so that sector or that stock reaches high valuations. One can choose diversification if the capital is large though.
Also if you can allot time, I guess the top down approach can be looked at, find a sector that interests you, learn about it and choose stocks from the sector. I think most of the investors in VP follow a bottom up approach, although they read about the entire sector to have a better understanding.
What we want from the PF, our objective, drives everything else I guess. If we want compounding then we have to look for and focus on the sectors where there is momentum, if we want stability and are okay with lesser returns then we can look for relatively stable sectors, and if capital protection is our priority we can look at decades old companies etc. If we want compounding I guess we cannot afford to be present in many sectors, time wise, mind wise or capital wise.
Or one can have different approaches towards different stocks in the PF, a high PE stock, a value stock, a dividend yield stock etc can present in the PF.
So as long as we are clear about what we are expecting, there are many ways we can go about it, so many models to choose from, so many ways to build.
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