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5:40-42 - "If a man wants to sue you for your coat, let him have it and your overcoat as well. If anybody forces you to go a mile with him, do more - go two miles with him. Give to the man who asks anything from you, and don't turn away from the man who wants to borrow."

8 May 2018

SHARE MARKET--If you could only invest in any 5 of the companies from NSE/BSE for the rest of your life. Which companies would you choose?

It’s difficult to decide just five companies to invest for a lifetime.
There are a lot of loopholes in ‘BUY AND FORGET’ strategy and the investors may face heavy losses in case they do not monitor/alter their portfolio regularly.
For example- during 2008 recession, Sensex crashed over 60% and many of the companies went bankrupt. If you were not monitoring your portfolio that time, the losses could have been significant.
Moreover, a large entity that is growing rapidly cannot maintain that growth pace forever. That’s why even if you investing for long-term, you might need to revise your portfolio after 8–10 years.

Anyways, coming back to your question, in case I have to invest in just 5 companies for the lifetime, I’ll keep in mind the following points-
·         The companies should be the leaders in their industry (too-big-to-fail-companies) with a good track record of consistent growth and returns in the past many years.
·         No two company should be from same industry (diversified portfolio). It reduces the risk of hurting my portfolio in case of an industry under-performs for whatever reason.
·         Companies should have a sustained competitive advantage (moat) so that they will remain profitable for the long-term. Few example of competitive advantages can be- Big brand recognition, loyal customers, Patents & trademarks, Monopoly, Entry barrier etc.
Based on the above points, here are my top five picks for the long-term.
·         HDFC Bank& HDFC
·         Asian Paints
·         Tata Consultancy Services (TCS)
·         ITC
·         Maruti Suzuki

You consult with your share broker and take decision.  Good luck.

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