Top 17 Large-Cap & Mid-Cap Stocks To Buy Now: HDFC Sec Research Report

Diversifying out of a concentrated Portfolio

Why do some investors prefer concentrated portfolio?

 Need to track few stocks only
 Concentrated bets could lead to higher returns and wealth building if bets are right,
 Often adding more stocks to a portfolio solely for the sake of diversification tends to water down returns,
 The relationship between diversification and volatility may have been over-stated for years

However in a concentrated portfolio:

 Risks are also concentrated, when your stocks underperform over a period,
 You feel left out when other set of stocks may be performing,
 Concentrated bets require a good deal of tracking, know-how, skill, and experience,
 Concentrated bets should not be positively correlated among themselves otherwise the risk of sharp moves in portfolio value rises even further
 Concentrated bets sometimes lead to more emotional and professional stress, which can cause in turn cause bad investment decisions.

While both concentrated and diversified portfolios have their own merits and demerits, we have prepared a list of largecap (and a few midcap) stocks which can be used by investors who seek to go for some diversification in their concentrated portfolios.

However, markets have risen quite sharply from March lows on the back of liquidity and hopes of early restoration of normalcy from Covid-19 pandemic. Some of the stocks suggested have corrected upwards even more. Hence staggered buying is recommended to benefit from any future falls and have better margin of safety.