Thread by @abhishec_s

Few steps that can improve your returns:

(for the stubborn, amateur, active investor, who should rather be indexing)

👇

Don’t buy anything that you are not comfortable buying at least 5% of your portfolio.

This is not a return maximisation hack, it’s a risk mitigation one.

You will have higher thresholds for inclusions if you force yourself to buy at least 5%. You will be more selective.

1/

Have at least 10 & not more than 20 stocks in the portfolio (if your portfolio is >>> annual income).

There just aren’t enough clean companies available in India at good valuations that you understand. I struggle to get to even 10 & I have being doing this for a while now.

2/

If your portfolio size is similar to your annual income then you can concentrate more — may be just three ideas.

But for those you have to patient & hope market gives you an opportunity to buy your favourite idea at a good price.

3/

Stay with Large Cap, Debt free companies.

Don’t fall for the siren song of multibaggers.

4/

Target 12% to 15% return. This is key.

You won’t take unnecessary risks. This is a fantastic CAGR. Look at performance of Equity Funds of your favourite FM over the last couple of decades to convince yourself.

5/

Average up when the thesis pans out. Don’t average down.

If you really understand the idea & the business you can average down. But on average it’s better to assume that you just don’t. Leave room for doubt.

6/

Don’t sell the stock just because it’s not performing (at least for a couple of years) unless there is negative development/new set of data that negates the original thesis.

7/

Don’t play turnarounds. Just don’t. This is a minefield.

8/

Don’t look for hidden gems. Obvious ideas are your best bet.

Some of the best performer large caps in India have been obvious trades for decades.

9/

I mark down my equity portfolio by 30% when making my quarterly family balance sheet. This mental hack helps in avoiding panic sells during sell offs.

At the same time since I am not marking down individual ideas I keep evaluating the thesis for each of those closely.

10/

Save every month. Create an excel where you track this number.

This will improve you portfolio performance. This cushions will help you avoid both greed & fear.

11/

The first goal is to have a portfolio 10 times your annual income. Then it’s like having 2 salaries (an awesome feeling). Assume that this will be driven by savings not your portfolio returns.

Don’t buy the new iPhone or a Car, stay on rent. Save like fanatic.

12/

If you can’t find ideas stay in cash or Index. There are worse things than sitting on a pile of sweet cash earning risk free returns.

13/

DONT

TRADE

IN

F&O

14/

Don’t coattail.

Even if Mr. Buffett asks you to buy a particular stock the first question you should ask him is — why? If you don’t understand it, let it go.

Treat all large, popular Indian “investors” as morons. Some aren’t but this assumption works on average.

15/15