They say Rome wasn’t built in a day. But remember: it wasn’t built by a solitary superhuman either. Instead, like any grand city, it owes its existence to the cooperation between small armies of engineers, masons, and craftsmen.
Indeed, this is the story of humanity itself. Think building the pyramids, putting a man on the moon, or mitigating climate change: every achievement that indelibly marks the world involves unlocking synergy with one’s past and present peers.
Put simply, teamwork is the invisible glue that holds together everything of great value — including your investment portfolio! And this right here is the key take-away of the latest annual note from the Equity Team here at DSP Asset Managers.
More specifically, we see some useful parallels between investing and the queen of cycle races, the Tour de France.
Think of each participating team (yes, the Tour de France is actually a team event!) as being akin to a portfolio, and each cyclist as being an individual stock. Even with a lead rider in the team, you need every team member to leverage their unique strengths in a strategic manner if the team is to have any chance of coming out on top.
Similarly, you need your portfolio to have the right kind of diversification so that it can weather whatever the market throws at it. A good mix of market cap segments and sectors will serve you well over every part of the race: steep climbs, precipitous drops, and boring flat stretches.
Maybe this sounds rather dull to you. Maybe you long for the excitement of regularly breaching the daily upper circuit, even at the risk of massive potential annual drawdowns. But really, investing success doesn’t have to be exciting. Simple is often better.
‘Buy high-quality stocks and hold on to them for years and years’ is a seemingly elementary and oft-repeated strategy. But we’re convinced this simple strategy remains one of the soundest means to unlock impressive returns.
After underscoring this key message, we dive into the current state of the Indian markets. While strong domestic opportunities have served to reinforce our optimistic long-term perspective on the economy, we also discuss two potential areas of concern, and how we plan to respond to them.
We then talk about why 2023 was the year of small- and mid-caps, and why we think high-quality small- and mid-caps currently represent an effective approach to long-term wealth creation.
Our bottom-up active approach towards evaluating stocks takes the spotlight next. We believe in taking rational decisions based on data, a process in which we’re supported by our team of analysts and our tech platform Jarvis.
Finally, we try to read the tea leaves of demographics: how, in our opinion, can investors capitalise on the fact that 50% of India’s working population in FY31 is likely to be Gen Z and Gen Alpha?
We hope you'll take the time to read our annual note in its entirety. Please share your feedback with us at investmentstrategists@dspim.com.
Click below to read the full note. It's long, but we promise it's worth it!
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