Frequently Asked Questions
Why Compound26.com?
- Skin in the game : Simply put, you and I (me and my family members) will have the same stocks. Let us create wealth together.
- Stocks in the portfolio are carefully picked for future potential gains in line with compound26 theme (doubling money every 3 years).
- Stocks selection is focused on value investing, long term compounding and protection of capital.
- I look at small, mid and large caps, searching for value to make high absolute return with limited downside risk.
How much risk and return can I expect from "My portfolio"?
I manage risk by investing in stocks ideas where I feel downside risk is limited, business prospects are very good and management is ethical. While fixed income securities give 6-7% returns after tax, I will be satisfied to double capital every 3 years. Given the domestic and global developments, news and sentiment, there could be 15-25% volatility and therefore portfolio may go negative temporarily on the paper. For me or for that matter for any investor risk is ‘permanent loss of capital’. Short term fluctuation is not risk for me. I invest in businesses I understand with sustainable competitive advantage, good management. Most of us know Warren Buffett, his portfolio fell by close to 50% three times in his career spanning 50 years. It is possible that not all my stock picks will do as expected but even if 60% of them do well, I can create serious wealth. The right time frame to judge my performance will be over a cycle of more than 3 years
How can I buy stocks in Indian market sitting outside India?
One can start NRE Demat account called PINS to buy/sell stocks in Indian markets. You can open NRE demat account at either ICICI or Kotak Mahindra or Axis or Zerodha to name a few. My recommendation is Zerodha as the transaction fee is very less compared to other services.
How much money can I start my portfolio to benefit from 'My Portfolio' service?
One can start with any amount. Smaller the amount, longer it takes to create wealth. For example, if you start with 5 lakhs, your investment would become ~40 lakhs in 9 years. If you invest 15 lakhs to begin with you would end up with ~120 lakhs (1.2 crores).
How many new stocks would you recommend annually and what would be the frequency of recommendations?
On has to understand that equity markets are extremely volatile; in times of panic market throws mouth-watering opportunities whereas in case of frenzy and euphoria sometimes valuations go way beyond reasonable levels. So depending on where the market is I find more number of undervalued stocks and hence you would see more than normal changes to ‘My Portfolio’ and there will be heated up times when I prefer to sit on the sidelines with patient and wait for better opportunities. I do not invest in something till the time I am convinced on investment thesis as well as valuations (downside protection) and by nature I am patient enough to wait for such opportunities to arrive and then act. Markets are for the most part efficient, therefore, imposing any fixed number of stocks and fixed timeframe for shuffling portfolio like monthly or bi-monthly will only be counterproductive.
What is the significance of name “compound26”?
Compound26 is started with an aspiration to compound investment at 26% CAGR for longer periods of time. ₹ 1 crore invested becomes ₹ 1000 crores in 30 years (1000 times).
How can I benefit from “My Portfolio”?
“My portfolio” subscription is started to provide a glimpse of the stocks I own. Stocks in my portfolio will provide a starting point to an investor. I am a long term value investor therefore I am not swayed by short term fluctuations in the markets. One can follow these general guidelines:
- Have a capital of Rs 15 lakhs or higher with minimum investment horizon of 3+ years.
- “My Portfolio” may have upto 25 stocks. My recommendation for you is to pick 10 to 15 stocks across sectors and diversify capital among those stocks.
- For any stock you select from my portfolio, do not commit more than 10% or less than 3% of capital. In other words, commit anywhere from 3-10% per stock. For example: For Rs 15 lakhs capital, capital commitment to single stock should not be over Rs 1.5 lakhs (10%) or less than Rs 45 thousands (3%).
How many stocks will you have in 'My portfolio’ at any point in time?
I would have minimum of 15 and maximum of up to 25 stocks in the portfolio. It is ultimately up to you to decide on how many stocks you are picking up to invest from my portfolio. History shows that successful investors have created wealth by investing in 3-4 great companies (concentrated investing) and there have also been fund managers and investors who created wealth despite over diversifying.
Can I repatriate money after I sell stocks in NRE?
Yes. You will have money in your account in just a matter of few days.
What kind of stocks do you pick?
I am constantly looking for opportunities for good businesses with growth potential and run by good managers in a bottom up approach (considering a stock and then looking at the sector). I do not constrain myself on market cap or sectors. I look at small caps, mid caps as well as large caps. Wherever I see value and find opportunity to make high absolute returns with margin of safety, I go ahead to dig some more details. In the long run, it's advisable to have a multi-cap and diversified portfolio.
Do you provide research reports and quarterly results update?
I am neither a research analyst nor an investment advisor. As an individual investor, without a team as of now, my time is effectively used to keep up with what is going on with the companies in the portfolio to deepen my understanding. I strongly believe that an investor will only be able to hold a stock in difficult times when he/she has developed the required conviction through in depth research about a company. However, a brief description of “Why I invested” under each stock should give some insight into my rationale.