When I started investing in 1979, I had not heard of ANY fancy words. My portfolio came in before my learning the jargon.

When I started doing my CA in 1982, I knew about balance sheets, but not enough about analysis. My portfolio was getting created alongside – of course with my father’s money!

In 1986 when I was practicing as a CA my jargon did not grow enough, but my investments were growing.

In 1988 when I became a sub-broker I realized how little people knew about equity investing.

In 2018 I realize how little I know about equity investing.

I have no clue as to how to decide on how much of my equity should lie in Largecap, Mid cap, Small cap funds.

Or in my case Medium, Large cap, Small cap…….shares.

I think the truth is, “There is no rule about how diversified your equity portfolio should be”.

Ideally, your portfolio should give you at least 2-4% p.a. in real terms, and the debt portion of your portfolio should give about 1% real returns.

When I bought Hero Honda it was small-mid cap, while I was holding it, it became Midcap by the time I sold it it was Large cap! This I can say for many of my holdings – PnG, LG Balakrishna Bros, LMW….all are mid cap, and I guess they will remain mid cap for a long time. Even Hdfc Ltd and Hdfc blank were mid cap when I bought them for the first time, and now they are large cap. It is not that I have never bought a large cap share, but I have NOT BOUGHT any large cap share as an investor. Apollo Hospital I bought for Rs. 9 – and that time it was a small cap (if not micro, I am not sure) and now it is a mid-cap. I doubt whether it will EVER grow to be a large cap. Shares like Hpcl, Bpcl, Ongc, IoC, SBI – all came in as large cap – but Hey I have not invested in them!!

Think hard. When 100 cars sell in India, 55 are sold by Maruti. When big corporate borrowers want to borrow money they go to SBI and ICICI. When Rs. 100 of home loan is disbursed, 35% is disbursed by Hdfc. So when the economy does well who will do well?

Some businesses will NEVER become a large cap. Or it will struggle to become a large cap – Colgate Palmolive for example. Nestle for example. Indian Hotels. Mahindra Holiday Resorts. They could still be market leaders. EiD Parry, Coromandel fertilizers, MRF, LMW, Cholamandalam Investment, ….or they could take a long time to become a large cap. Do you say “I will invest only in large cap”. That means the share which you would not buy at Rs. 65 suddenly looks good at Rs. 1800 because it has become a large cap. Sounds silly is it not?

You buy shares of good companies. Period. Then when you put it into some software it tells you what percentage of your investment is in Giant Cap, Large cap, Mid-cap, Small-cap and Micro-cap. There is no formula to tell you how much money should be in each cap category.

Buy good quality shares depending on your ability to read the balance sheet. If you do not have much ability to read nor the willingness to learn, go to a mutual fund. Then use some formula – say 60% in large cap, 25% in midcap, and 15% in micro cap. Review after 3 years. If you are happy with the returns, stop asking people for advice. Makes no sense…

But Subra if this is true…why are so many funds created by the MF industry?

Ha..that is because of YOU my dear investors. If I tell a person Hdfc Top 200 is a good fund…he will say “that I have..tell me something else”. So he has to be given “Prima”. Then he will say give me something else. So he will have to be given “Icici Pru discovery”. Then he will ask for more so give him “Mirae Blue chip” then “Motilal Oswal…”Because he thinks he has to diversify. He will want 10 funds and do Rs. 5000 pm SIP. Actually even if he did one SIP of 50,000 in one of these funds, he will not be badly off. However, he cannot stand in a party and say ‘Mirae’ Oh i have that also. Motilal, I have that also. Kotak…Oh I have that also. He may not even know which fund house which scheme and what is the IRR.

So a combination of IFA not being able to sell big SIPs, clients feeling happy to have 10 schemes of 5k instead of 1 scheme of 50k – in the asset gathering industry….this is the reason why we have 5000 schemes and about 12 of them worth considering.

Note: all names are just for examples…I may or may not have invested…but yes in all these fund houses I know somebody or the other.