Investments in the stock market are subject to market risk and hence great care should be taken while investing in equity assets. Hence, an investor needs to be extremely cautious while building his stock portfolio. according to investment and Share Market Experts, one should have a diversified portfolio and in that portfolio, allocate funds in equities based on risk appetite. Also, stocks can be selected based on investment goals and one to two stocks from a segment would be sufficient to keep one’s stock portfolio evenly distributed.
On how much equity exposure one can have while building one’s portfolio, Jitendra Solanki, SEBI registered tax and investment expert, said, “There is no rule as to how much fund can be allocated to equity as it depends on the risk appetite of the investor.” However, I suggest an investor to subtract his/her age out of 100 and the final figure should be the benchmark on which one can go for equity exposure. If one’s risk appetite is low, he can keep his equity exposure lower by 5-10 per cent. given figure. Even in high risk situations, one’s equity exposure cannot exceed the number arrived at by the above arithmetic.
How much should you invest in equity
Explaining the equity exposure rule, Jitendra Solanki said, If an investor is 35 years old, he can go for a maximum exposure of 65% in equity while the rest will go to debt and other asset classes. But, it is for those with high risk appetite. If the investor has a moderate risk appetite, the suggested equity exposure is 55 per cent. However in case of very low risk appetite, the appropriate equity exposure is minimal and the high risk investor has the opposite i.e. 40:60 ratio means 40 percent equity and 60 percent dent and other asset classes.
Solanki also said that equity also includes equity mutual funds. Ideally, mutual fund stock exposure should be kept in the ratio of 50:50.
On how to build a stock portfolio, Avinash Gorakshkar, Head of Research, Profitmart Securities, said, “Before going for equity exposure, one should have a clear idea about their investment goal. How much money they can allocate towards long-term goals Kitna paisa medium term, short term and very short term.”
How to pick stocks?
Gorakskar said that for long-term goals such as 5-6 years or more, one can go for evergreen sectors such as banking, auto, infra and IT, while for medium-term goals, subjects that work for one to two years can see. For example chemical, pharma and metal themes were working during the covid lockdown, while commodity started working after the covid restrictions were eased. So, while scouting stocks for short to medium term goals one needs to choose the theme that will work for the next one to two years.
On how much stock one should allocate in a block, Ravi Singhal, CEO, GCL Broking, said, “Ideally, one should choose one to two stocks from a block while investing for long term and medium term while for short term For this, the stock specific approach is appropriate.”
On how to average while building one’s stock portfolio, Ravi Singhal, GCL Broking said, “Generally, it takes two to three years for a stock market investor to build a portfolio. However, if a stock falls around 6-7 per cent from the buy level, one should re-enter at lower levels without exiting the market.
However, stock market experts have given clear advice to investors to avoid trading.
Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint. We advise investors to do due diligence with certified experts before making any investment decision.
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