Generally we think that if number of stocks increases then returns of that portfolio started mean diverting to Index Returns. But this need not be necessarily true. Just take a case. If we find some good stocks out of Midcap 150 stocks , fulfilling basic parameters like Return on equity, Debt etc…So if even 50 good stocks are selected, returns can be way better than index returns…There are so many Mutual funds which are giving high returns like SBI Small Cap …where more than 50 stocks are held…This is a fallacy that more number of stocks give average returns like index…It depends on which stocks you have selected and not number of stocks…If u select 50 stocks which all are giving 30% CAGR, then why the portfolio will give 12% CAGR of Index?
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