I have subscribed to Value Research Stock Advisor and mostly, follow the All-Weather and Best Buy Now stock lists. How should I allocate between these two types of stocks? Should it be equal-weighted or should I follow some allocation principle to spread my investments among large-, mid- and small-cap stocks?
- Abhik Basu
All-Weather stocks are the ones that you can buy anytime if you wish to keep them for a long period of time, such as 5-10 years. The reason why these stocks are called all-weather is that these companies are run by sound management and non-cyclical in nature. These stocks can prove to be a good buy if kept for a long period of time, irrespective of the price they were bought at. These stocks are able to withstand the cyclicality of the economy.
The Best Buy Now list has about 15 stocks, which also include all-weather stocks. If you have subscribed to Value Research Stock Advisor services and are in a dilemma over which stock to buy, I think you should go with the Best Buy Now list. The list is meant for both seasoned investors as well as new investors. This list features the stocks that you should buy right now. However, while talking about buying stocks right now, it doesn't mean that you buy stocks at one go. Like we advise investors to invest in equity funds through an SIP, investors should build positions in stocks in a similar manner.
Coming to the question as to whether you should follow some allocation principle while allocating corpus to buy large-, mid- and small-cap stocks. I think you don't need to do this. You should focus on investing in good companies irrespective of their market capitalisation. Also, the Best Buy Now list has recommendations from across the market capitalisations. So, don't burden yourself with too many rules. Just invest in a combination of All-Weather and Best Buy Now stocks. Also, keep an eye on the companies that you invest in. You can also take help of the periodic updates that we provide on companies to form your belief in companies. It would also help you know when to exit a stock. For instance, if a stock price rises by 15 per cent, it does not necessarily mean that you should sell that stock. There may be a possibility that this stock still have a long innings left. Similarly, if a stock falls by 15-20 per cent, it may be due to something that has affected the company's business in a permanent way or it may be due to some short-term noise which is affecting the market.
Build in a portfolio of 15-20 stocks with considerable positions in the same and stay put. Also, be on top of the companies that you invest in.