Often investors ask me as to how to start building a strong long-term equity portfolio and which stocks to look for a safe-harboring of their hard-earned money?
But, the answer to this question is not easy as long-term portfolios are not built over-night or at a particular time interval. Investments should be done in a slow and steady manner with respect to both stock and time diversification strategies.
Building portfolio is a continuous process which involves gradually infusion of your savings into equity assets at different price and time points. No body knows where will market bottom out in a bear phase or top out in a raging bull market.
Thus, by diversification and systematic investment plan you can reduce your risk of being shaven-off by market volatility and risk factors. Your risks are spread only to the extent of small trenches of investment at any particular point of time.
In my opinion, this is the best time to start building a long-term investment portfolio with four core stocks – Reliance Industries, BHEL, L&T and SBI.
Try to accumulate these four heavyweight index stocks on every significant fall. While RIL is from oil and gas business, BHEL is from power equipment manufacturing space, L&T is a pure engineering goods play and SBI is a proxy banking stock for Indian economy.
From the above list of four stocks, L&T looks a bit over-valued in terms of its price-to-earnings multiples; but the stock has corrected quite a good deal over the last couple of months. However, the stock is likely to test Rs.1200 based on technical forecasting indicators, as it breached its crucial support at Rs.1500 few weeks back.
BHEL looks very reasonably valued with its downside over-exaggerated by concerns of order execution and competition from Chinese equipment manufacturers.
On the other hand, public sector banking major SBI has corrected sharply from the highs of Rs.2500 to Rs.1700 during last three months. The company’s stand-alone rating has also been slashed by rating agency Moody’s on account of its deteriorating asset quality.
Reliance Industries has under-performed the market since last many quarters led by concerns on its gas production output in D6 block of KG basin and regulatory hurdles spanning the sector. However, if markets need to move higher, it needs a firm support from the heavy weight RIL to move to a higher trajectory.
Disclaimer: The above content/report is only for the educational purpose of the readers. It does not qualify as any advice or recommendation to Buy/Sell securities. The author and the blog are not responsible for the reader’s decisions based on the above report.