Why I maintain a free subscriber only Model Portfolio ?

After my last monthly newsletter to blog readers, I got few questions on Model Portfolio. I am penning this post to answer most of those broad questions that came my way

What is Model portfolio ?

Model portfolio is a collection of businesses at a point in time which in my humble opinion has ability to deliver superior returns over a three to five year time frame over benchmark indices (mid cap / small cap). The operating word here is ‘ability’ (not promise)

Investors should very carefully decide his/her risk appetite and the returns expectations, as not everyone’s situations is same. As a prudent investor first

  • Determine your willingness to take risk  – Are you an emotionally a person who can handle risk ?
  • Ability to take risk – Does you economic situation allows you take risk by investing in equity

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If answer to any one of above is ‘No’ then equity investment are not for you.

Should I replicate Model portfolio to achieve my investment goals ?

No, as Model portfolio is not an investment advice and should not be treated as one, think independently and invest wisely

What is selection criteria to add or delete companies in model portfolio ?

I have four stacks under which I tag companies

Before tagging them in any of the four stacks at a minimum I would have firmed up my view on

  • Management
  • Business
  • Valuation

This is bare minimum information required by me to put the business under any stack. The four stacks are

Long term trend stocks

These are companies which have huge momentum sectorial tailwinds. My strategy is to stay with them as long as trend is visible and valuations are not over stretched, In case valuations stretch I tend to book some profits (one hand is better than two in bush)

Undervalued situations

These are companies which are trading below their intrinsic value. I would hold them till valuations catch up. As markets can remain irrational longer than you can remain solvent these positions can take very long to reach their intrinsic value

Unknown triggers

These are companies wherein I think that companies have hidden assets / actions which would play out and change complexion of the company. I tend to put a very small portion of portfolio in these situations

Momentum / Target based situations

These are companies which funds are chasing as their inherent quality has been discovered in markets , Our objective to get in and then get out once our target is met. We don’t sulk if the stock runs 200% more after our exit.

Lastly many companies travel between these stacks during their lifetime in model portfolio

If Model portfolio is not investment advice why it is published every month in newsletter ?

Many of model portfolio companies have been featured in posts as an example, One of my objectives to write on Tankrich is to merge theory with practice, So on one hand you read how ‘Moats can be determined by using Floats’ while on other hand you will see a company in model portfolio bought practically on that concept. I have seen my learning improve when I apply theoretical concepts in markets and I anticipate same for readers and fellow investors

How do you allocate to a new position ?

I have discussed position sizing in details previously. I have put few rules as well

  • Across four stacks I will have maximum of 20 companies to hold, 20 is just a number that I feel more in control of
  • I will trim if a single position is becoming 20% of market value of portfolio
  • I would desire to keep at least 15% of portfolio in cash all times

More questions ? Put them in comments below

Happy Investing

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5 comments

  2. Amit says:

    An excellent post, thanks very much!
    I just have a suggestion – it would be a better learning experience if you classify companies among the four stacks in your newsletter. Also we can start a post reviewing all the three criteria’s – Management, Business and Valuation.

    • Vivek Bothra says:

      Thanks Amit – First suggestion taken onboard however writing on each company on all three parameters would be something that I can’t implement immediately

      • Amit says:

        Thanks Vivek. I understand it would not be feasible to write for all companies. My second suggestion was not for all companies however for 2-3 top conviction companies as and when time permits.

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