8th January
It is definitely addictive. For the past four days, I have been religiously checking the value of my five stocks. There aren't too many changes, but it's thrilling to watch my money grow bit by bit. It has also accelerated the pace of my search for five more stocks to invest the balance Rs 75,000 in. As mentioned earlier, I want to reduce my dependence on broker's recommendations (by the way, why do brokers send e-cards wishing you prosperity when Diwali is months away?). So I'll select this set on my own. It should be interesting to compare the performance of my stocks with that of my broker's.
12th January
If you Google 'how to build a stock portfolio', almost every story claims diversification to be the most important strategy for reducing risk. Not only should you buy stocks of various sectors but also of different market capitalisations. Spreading money ensures that if you lose on some stocks, you win on the others. But in black swan years like 2008, stocks are like Humpty Dumpty—they all come tumbling down.
Understanding this concept was important to answer a question I have been mulling over: from which sectors should I choose my next few stocks? I did not face this dilemma during my first bout of stock-picking because I had limited my universe to broker's suggestions. Strike out on your own and stumbling blocks appear at every corner. No wonder stock analysts are in such high demand. I have already invested in the infrastructure, hospitality, oil and steel sectors. To diversify further, I have more choice than I want: banking, pharmaceuticals, information technology, FMCG, telecom, automobiles, media, shipping, real estate, finance, transport, etc. Now you know why I don't like diversification.
15th January 
According to Google Trends, India ranks third in the search for 'stocks' on the Net, behind the Singaporean and US Netizens. No wonder there are so many Indian portals offering informationbut very few are reliable.
The trick is to zero in on the sectors that are expected to do well in the next two to three years (it is also the period for which I want to remain invested). Actually, this is no trick. I could think of no other strategy but this, the most obvious one. I trawled the Net for sector forecasts and turned up with enough material to keep me busy for three hours on the road; I was on my way to interview an entrepreneur.
Here's why the drive was fruitful: I have selected five sectors that will 'diversify' my portfolio further. The first to make the cut was automobiles. Though it might have a hard time due to the possible roll-back of excise benefits, higher sales should more than make up for it. The rate at which cars and two-wheelers are zooming out of showrooms in January makes experts predict record sales this month.
The pharmaceutical sector has been going great guns and hopes to expand its customer base by exporting products to Europe and Asia Pacific. The domestic market is also vibrant due to the untapped potential in rural areas. Also, the contract resources and manufacturing segment (responsible for the medical research and development) is expected to recover due to the resurgence of global economies.
Similarly, several brokerages are betting on the information technology industry as demand from overseas clients climbs up, though not to the pre-crisis level. The stable FMCG stocks are expected to do well as prices of agro products are likely to go up (another reason for my ever inflating grocery bills). Finally, I chose the banking sector, which is expected to look up as economic growth improves. This will result in higher credit offtake, which means more industries are expected to take loans. This, in turn, is good for the banks’ balance sheets. I wonder which school the research analysts went to. Why can't they write without jargon?
19th January
No, I did not postpone my stock selection for the weekend; after all, I hope to enjoy the two days. In fact, I had picked my stocks on Friday night but was too lazy to write about it. Moreover, I wanted to stew over my decision. Not that I remember much, but a manic Monday at work (what is it about deadlines that bosses never see beyond them?) ensured that whatever I had thought of was quickly forgotten. From the sectors that I had listed out last week, I first figured out the five biggest companies in terms of market capitalisation. Then I calculated their PE ratios and the stocks with the lowest valuations turned out to be Lupin (27.8), Axis Bank (18.67), HCL Technologies (23.85), Britannia (20.95) and Hero Honda (18.01). This style of stock selection is called the top-down approach (trust these analysts to jargonise everything), where you begin at the industry level and narrow down the choices till you have the final list of stocks.
The process was anything but easy. If you do not subscribe to a market researcher, laying hands on sector reports is more than a day's job. I used my colleague's password to gain access to most of the reports, but I must hunt out a more reliable way. Paying for advice is not an option (not when I have invested only Rs 1.5 lakh) as it will increase the cost of investment. Yes, I again distributed Rs 75,000 among the chosen five. My father was happy that I had picked the stocks on my own. For the same reason, my RM was unhappy. Does this mean I shall not get e-cards anymore?
