June 20, 2024

INDIA TAAZA KHABAR

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My Stock Portfolio Analysis: May 2024

10 min read

This article compares my stock portfolio with an equivalent investment in a Nifty index fund and the Nifty 100 Low Volatility 30 TR index. We post this comparison each month. Before we begin, new readers need to appreciate the context of these investments.I started direct equity investing only after achieving a comfortable level of financial independence and ensuring my son’s future portfolio is reasonably secure. At the time of writing, its value is about 11.74% of my equity MF retirement portfolio and 6.99% of my total retirement portfolio.Therefore, I invested without the fear of performance. There is no experimentation or research in the stock selection strategy. That is often a waste of time and, therefore, a waste of true wealth – time. I continue to invest in the same way. Plenty of money can be made in low-volatile, robust blue-chip stocks.Caution: No part of this article should be treated as investment advice. I started investing in stocks after my goal-based investing was in place. Readers must appreciate that I started investing in stocks after hitting the threshold of financial independence. So there is no pressure for me when I pick stocks the way mentioned here. Please do your research and buy as per your circumstances.My goal is to buy stocks with practically zero research. I also continue to invest in mutual funds as usual.I have purchased mutual funds every month, regardless of market levels, and I shall strive to copy this uninteresting strategy for direct equity if I have the money. Also, see Fourteen Years of Mutual Fund Investing: My Journey and Lessons Learned.Time is not just money; Time is unquantifiable money. Time wasted in stock or mutual fund analysis, the right time to invest, etc., is an unquantifiable loss. So, I aim to buy a fund or stock within a minute.There is zero skill involved in any aspect of my portfolio. I compensate for the lack of knowledge with discipline. Randomness (aka luck) plays a massive role in the return numbers below.After evaluating the performance of low-volatility indices, I got the confidence to invest in stocks. I told myself I would not do any stock analysis or research. A quick check of company health, a brief volatility review, and buy.  If I cannot buy a stock within a few minutes, I am wasting time and money (in that order).The way I see it, the stock portfolio is part of my retirement portfolio basket as a dividend source. It could serve as an emergency fund as a last resort. Maybe I will find another use for It in future.In FY 2020-21, this portfolio’s total annual dividend income (pre-tax) was about 30% of my current monthly expenses. In FY 2021-2022, it increased to about 56%. In FY 2022-23, it became about 70%. In FY 2023-2024, about 88% (updated to March 31st). The next goal is to receive one month’s expenses as a total quarterly dividend (post-tax!). I do not consciously reinvest dividends. Younger people should. It matters little as long as the overall investment made each month keeps growing healthy: How ten years of tracking investments changed my life.This stock portfolio is part of my overall retirement portfolio. I am striving to build the ideal retirement portfolio. Also, see How to build a second income source that will last a lifetime.Elements of an Ideal Retirement PortfolioStock picking strategyChoose stocks with little or no evaluation or analysis.Choose low volatile stocks with sound financial health (low debt min requirement)Choose stocks that trade close to their all-time highs (approx momentum indicator). See, for example, A list of stocks that have traded close to their “all-time high:Do not be afraid to pick expensive stocks at absolute price and valuation. Note: Value investing may sound intelligent and enticing, but it is riskier. I neither have the age to take on such a risk nor the qualitative insights to pick stocks that the market has shunned but will be discovered sooner rather than later. To appreciate the risk associated with value investing and why it is more qualitative than quantitative, see this analysis: Is it time to exit ICICI Value Discovery & Quantum Long Term Equity?When in doubt, ask your wife when she is about to fall asleep in the afternoon.Do not fear dividends (or dividend taxation).What matters primarily is company health. Whether it is a dividend payer or not is incidental. It makes no sense to say no to a company because it pays huge dividends! It makes no sense to sell a stock because it has increased dividend payout.All stock investors over ten years will receive dividends, regardless of whether they like it. There is no choice, unlike mutual funds.Dividends are not “extra” regarding returns/performance but represent real profit. It can serve as a source of income for an older investor, Building the ideal retirement portfolio. Younger investors will never understand this, and that is fine.Peaceful sleep is the best form of realised gains, hence the importance of low volatility and reasonable momentum to business health (not all stocks in my portfolio will check all these boxes).This is the archive of previous portfolio updates.Related videos: How to buy your first stock without breaking your head Stock Portfolio AnalysisThe debt-to-equity ratio of the portfolio is 55.63% (vs. 81.2% of the board market, according to Simplywall).st – we assume this is similar to Nifty or Sensex)Dividend yield: 1.4% vs 1.2% broad marketDividend growth rate: 9.6% vs 12.4% broad marketDividend payout ratio: 53% of net income.This is the portfolio evolution.Historical stock portfolio value as of May 10th 2024As of May 10th 2024, all results are computed using our Google Sheets-based stock and MF portfolio trackers.Stock portfolio weights and returns as of May 12th 2024Please note: (1) Although investments started in 2014, most of the money invested is only from July 2020. So, the portfolio is still too young.(2) I did not invest between Nov 2021 and April 2022 due to other priorities. At the time of writing, the last investment was made in October 2022. The portfolio weights have drifted naturally. When I can invest, I try to chase momentum within the portfolio and invest in stocks that have gained the most since I started investing in them.Dividend Return = Total Dividends divided by Total InvestmentCapital Gain (CG) Returns = Total CG divided by Total InvestmentTotal Return = Dividend Return + CG Return.CAGR = ( 1 + Total Return ) ^ ( 1 / Avg. Years) – 1The average investment duration = 3.50 years for the entire portfolio. This is the average of all purchase investment tenures weighted by the investments.CAGR is computed only if the average years = > 1. XIRR should be taken seriously only if the average number of years is => 1.All returns are before tax.The portfolio is compared with identical investments into UTI Nifty 50 Index Fund (direct plan!)Many people and portals mistakenly treat dividends as cash payouts while calculating XIRR. This is not the universally accepted academic and regulatory convention. Only purchases and redemptions by the investor should be used in the XIRR calculation. Dividends should be treated appropriately as reinvested (a rule also mandated by SEBI), and other corporate actions should be treated appropriately. The freefincal stock tracker aligns with SEBI regulations for all corporate actions (dividends, splits, buybacks, etc.)Comparison with benchmarkThe NIfty 100 low vol 30 is a better benchmark for this portfolio. However, we can only compare it with the index, not the ETF (from ICIC), which was launched only in 2017.Stock portfolio (absolute return)* 35.33%UTI Nifty index fund (absolute return)* 61.56%Nifty Low Vol 30 TRI (absolute return)* 72.58%Stock portfolio CAGR 9.02%UTI Nifty Index fund CAGR 14.68%Nifty Low Vol 30 TRI CAGR 16.86%Stock Portfolio XIRR (incl all corporate actions like dividends and splits) 9.65%UTI Nifty Index fund XIRR 16.47%Nifty Low Vol 30 TRI XIRR 18.58%* Total return and CGAR include liquidated holdings (see monthly update archives for details).Absolute return of stock portfolio vs UTI Nifty Index Fund vs Nifty 100 Low Vol 30 TRI as of May 10th 2024According to Tikertape, the portfolio has no red flags, with a beta of 0.57. This means the portfolio is 43% less volatile than an index like the Nifty or Sensex. The stock portfolio has underperformed for the past several months. This does not bother me too much for three reasons: (1) The stock portfolio is a small portion of my retirement corpus, (2) I treat this as a future income source and (3) at least as of now, the return spread is lower than the benchmarks (as seen above), and that is something I value.I have had fun building this with no effort and will continue. Please do your research and invest. Do share this article with your friends using the buttons below. 🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users! Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 1,000 investors and advisors use this! New Tool! => Track your mutual funds and stock investments with this Google Sheet! We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.Follow Freefincal on Google NewsSubscribe to the freefincal Youtube Channel.Follow freefincal on WhatsApp Podcast: Let’s Get RICH With PATTU! Every single Indian CAN grow their wealth! Listen to the Let’s Get Rich with Pattu Podcast You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.Let’s Get RICH With PATTU podcast on YouTube. 🔥Now Watch Let’s Get Rich With Pattu தமிழில் (in Tamil)! 🔥Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincalHave a question? Subscribe to our newsletter using the form below.Hit ‘reply’ to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question. Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!About The Author Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice. Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! 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Life-long access to videos!    Our new book for kids: “Chinchu Gets a Superpower!” is now available!Both the boy and girl-version covers of “Chinchu Gets a superpower”. Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!Feedback from a young reader after reading Chinchu gets a Superpower!Must-read book even for adults! 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