Devina Mehra, chairperson, managing director and founder, First Global, shared her expert insights on picking winning stocks during the final day of Outlook Money’s 40After40 Retirement Expo. She emphasised on the importance of diversification, focusing on strong fundamentals, managing risk, investing in global securities, and maintaining a long-term perspective to achieve success in stock picking.
Look Beyond Borders For Better Returns
Mehra advised investors to diversify their portfolios by including stocks beyond just Indian markets.
“If you look at equities, India is less than 5 per cent of the market cap of the world. There is no reason why 100 per cent or 90 per cent of your assets should be in India. So please look at global diversification and remember that the US is not the globe either,” she said.
She added: “When I started working, the dollar was Rs 12. There has been an 87 per cent depreciation in the course of less than a career. So you cannot make a 10-, 20-, or 30-year plan or look at your financial goals and forget about global diversification.”
You Win If You Don’t Lose!
Mehra emphasised that investing is about minimising losses, not just aiming for gains.
“I was looking at a study, there was a scheme which outperformed in 93 per cent of the upturns but it was still among the bottom five schemes - because investing is a loser’s game. You win if you don’t lose! So your first priority should be not to take a big hit on your capital and for that you have to take the small hits on your capital. So always have a stop loss."
Mitigate Risks Through Diversification
Mehra advised investors to be realistic about stock picking, acknowledging that not every investment will perform as expected.
“I say the best thing you can do for your portfolio is, when you invest, tell yourself – I may be making a mistake. Because a reasonable percentage of your picks are not going to do what you thought they would do, however, well you choose them. That’s why I am saying stock picking is a limited thing, because there is nobody who knows in advance which is going to be your multi bagger,” said she.
“For instance, in 1996, I can’t say I knew the trajectory of HDFC Bank or Amazon. At best, when you are picking a stock, you can say it will double or triple. Beyond that no one has the vision,” she added.
Mehra said that while you cannot predict which stocks will be big winners, building a diversified portfolio of stocks gives you a better chance. Out of those, some might underperform, others might give decent returns, and with a bit of luck, a few could turn into multi-baggers.
She added: “Always buy a portfolio of stocks, at least 25-30 stocks as per your system. And out of those 25-30 stocks, maybe 5-7 stocks are going to be duds where you will need to get out. Some will give you reasonable returns. And then if you have picked them well, and your luck also favours you, maybe you will get two or three multi-baggers out of that.”
She also revealed the sectors where she is currently overweight. “As of now, we are overweight on auto components, capital goods and industrial machinery,” she said.
