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Which Stocks to Invest In? How to Build Your Portfolio of Stocks? [Part 3]

If you haven't read Part 1 or Part 2 yet, please do so first.

In the last two parts (Part 1 & Part 2), we saw how I imagined a normal day in my life and selected candidates for the stocks in my portfolio. I say selected candidates because we have just seen one aspect of a company we might want to invest in i.e. its product portfolio. There are other things that we need to consider before finally deciding to invest in a stock for the long term. I included the following as part of my research: 

  1. Company's Stock Price Movement: I'm a big believer of - "A company's stock price reflects how it does business in the long term". An appetizing graph would look something like the one shown below:



  2. A graph with huge ups and downs in the stock price movement reflects a bigger risk, because if you'd want to liquidate your position in the future, and the graph at that time is in a big-time downtrend, then you might have to book a loss. A graph that goes straight upwards signifies a lower risk.

  3. Company's Financials: Quarter-over-Quarter (QoQ) growth percentages, Year-over-Year (YoY) growth percentages of Revenue, EBITDA, Net. Profit. The higher these growth percentages are, the better it is, because these growth percentages are indicative of the aggressiveness with which a company might be trying to expand its business. Other than these, a company's balance sheet must also be studied.

  4. Company's Management: Imagine you have a BMW, but a crappy driver to drive it. Riding in this car will be a huge risk because the driver could crash it any time, involving you in a fatal accident. One must look at the high-level leadership who is driving the day-to-day business activities. Only if you feel that the leadership is strong and has the potential to drive your BMW safely, must you take the decision to sit in the car.
We, at Product Vyapar analyze companies on the above parameters and create Youtube videos so that you can sit back, relax and watch these videos while we do all the research and present it to you. Do visit our channel to look at the videos we have put forth for you there, it's completely free of cost!

I started my investment journey around 2 years ago. I thought about the stocks I wanted to invest in the same way I have presented to you in the first two parts, did extensive research on each of them based on the parameters I've described above in this part, and then decided to put my money to work for me. I took an SIP approach of investing in these stocks, investing as and when my salary kept coming every month.

My current % returns (as of 16th August 2020) are as follows:


The overall return being around 30%*. 

* I must tell you that I had decided to sell my portfolio completely at the beginning of March 2020, after which I started re-investing daily by spreading it out over the next one month.

Summary

In this blog, we covered the following points:
  • The story behind an investment.
  • The research behind an investment.
  • The result (my personal example) of what carrying out the processes mentioned in the above two points leads to.

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