“You can not make more than 15% in a well diversified folio” I think I would disagree to that, Peter Lynch managed funds which gave 30% return over many years even though he was holding as many as 1400 stocks.
Samir Arora from Helios showed how even the 150th stock in terms of return in a particular year outperforms the average Nifty return for that particular year. Even Warren Buffet did not get much success through his concentrated holdings at a later stage of life and he could only beat the index with the help of his tail stocks (You can watch Samir Arora, he presents the data)
Mohnish Pabrai who is a great proponent of concentrated folio, his fund (Dalal Street LLC) has given return of -49% over last 10 yrs.
Why I feel a concentrated portfolio is a myth and people who have been successful are just lucky:
Suppose the entire stock market has only 10 very intelligent people who have done all the analysis, got their valuation models correct, and have gotten the correct entry price. Now it cannot be the case that all 10 will pick the same 10 stocks (Generally I am assuming a concentrated folio means 10 stocks). So lets say they all have 7 stocks in common among each other. So that means there are still 30 different (unique) stocks that all these 10 super intelligent people have chosen amongst each other, so how does the pool of stocks that is expected to give super returns over a long term remain a concentrated one?
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