How to create your Stock Portfolio?

An intelligent investor should know the importance of a well-diversified smart portfolio. Whether he is investing in stocks, bonds or mutual investment, he always chooses his portfolio smartly. Although most people have a different strategy for creating their portfolio, there are a few main points that should be taken care of while creating your portfolio.

Portfolio Diversification

A smart portfolio is the one, which maximizes the profit and minimizes the risk. The first step of creating an intelligent portfolio is ‘Diversification’.

What diversification means, in general, is to buy stocks from different sectors (Banks, autos, FMCG, energy, IT, etc) rather than buying a single or two stocks of huge amount. In short, it can be explained by the old saying- ‘Don’t put all your eggs in the same basket’.

While many people argue that, it makes a lot of sense to invest a huge sum of money on a sure-shot stock (which you are too confident about- example Microsoft, which gave 10 times or more returns). However, we like to differ from the argument.

There are various reasons we can give you to support our conclusion.

First, you never know which stock is next Microsoft. Stocks like Microsoft are only a few among more than 5000 stocks in the stock market. If by any chance you made a mistake or if by bad circumstances, the company is not able to perform as expected, and then your whole sum of money will be in vain & you may be in a tremendous loss. Second, for investing in such a company, you need to be 1000% sure. You need to do a lot of intense investment about the company (which is generally not possible for a retail investor), but if you have a diversified portfolio you can slight risks if you are confident about your other stocks.

For example, if you have 10 good stocks, you can be certain that most of them (8-9) will outperform the market and give you a good result. 1-2 bad stocks in a group of 10 will not affect your overall portfolio. However, in the case of a single stock, it is either win or lose.

If you want to learn more about stock market investing strategies, I will highly recommend you to read this best-selling book: One Up On Wall Street: How To Use What You Already Know To Make Money In the Market by Peter Lynch

Therefore, in this post about How to create your stock portfolio, we suggest our retail investors invest in a diversified portfolio. Do not buy 1 lakh shares of just one company in your portfolio.

The advantages of a diversified portfolio:

  1. Diversification helps you in giving liberty to choose a variety of stock. You need to do extraordinary in all the stocks you choose. If most of the stocks are performing well, then your portfolio will overall be in profit. Like the legendary investor Warren Buffett said ‘You only have to do a very few thing right in your life so long as you don’t do too many things wrong.’
  1. Sometimes some sectors underperform and because of which the stock will underperform. Say, if the bank sector is not performing then your bank stock will be in loss. However, it is very less likely that all other sectors (IT, autos, FMCG etc), will also not perform at the same time. During such times, diversification can help you to remain in profit withholding the stocks of other sectors.
  2. Further, if because of some unpredictable reason, one of your stock is not performing well, but you are confident that it will perform well in future, you can still keep the stock on the stake of your other good-performing stocks. You just need to balance out and be overall in profit. [In undiversified case, if your stock is not performing, you will be in overall loss and which might lead you to sell that potential stock.]

Hence, form the arguments that we just put forward, you must follow the diversified portfolio in the stock investment in order to minimize your losses.

How to create a diversified stock portfolio?

Now, we will give you an example of how to create your stock portfolio using diversified portfolio strategy so that you can get an idea of how to create one.



Stock Name Sector Price No of Stocks Investment** % in Portfolia
BPCL Oil & Gas 713.12 20 15000 21.28%
IndusInd Bank Bank 1334.22 10 13500 19.15%
Hero Motocorp Auto 3163.05 2 6300 8.94%
Tata Motors Auto 460.20 10 4700 6.67%
Infosys IT 990.45 10 10000 14.18%
Tata Steel Metals 485 20 10000 14.18%
Emami FMCG 1077.55 10 11000 15.60%
Total 70500 100%

**Investment is not just Price X (no of stocks). It also includes other charges like brokerage charge, transaction charge, STT, service charge etc.

Quick Note: New to stocks and confused where to start? Here’s an amazing online course for the newbie investors: INVESTING IN STOCKS- THE COMPLETE COURSE FOR BEGINNERS. Enroll now and start your stock market journey today!

There are other important points in our discussion about how to create your stock portfolio, which need to be taken care while creating your portfolio, and will be discussed in subsequent posts.

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  • SOUMITRA SEN says:

    Stock trading is my passion.I want to learn more and more from your side.


  • Adil says:

    That’s good for starters

  • arunangshu roy says:

    I want to learn stock market investing and make portfolio which give me return regular basis, please help and sugest

  • sajeesh says:

    hi kritesh,I AM beginner and interested in share market.will you plz guide me

  • Olusoji Oyebode says:

    Hi Kritesh,
    My name is Olusoji. I got one of your posts on Quora on how to start stock trading. I have been researching on this and your contribution on Quora really helped. I presently live in Canada and I will like to trade stocks. I will be glad if you can put me through how I can get started, get a dummy account to prctice before going live and some of the materials you can recommend to be fully informed to get started.
    Presently I have about $5,000 I want to start with, but I would not want to get my fingers burnt by not getting so prepared.
    I will like to learn from you and we could exchange mails.
    My e-mail
    I will be glad to hear from you soon.


    • Kritesh says:

      Hi Olusoji, Thanks for commenting. Although I don’t have knowledge of the stocks traded in Canadian stock market, but I can teach you the fundamentals. Thanks for contacting me.

  • Suraj Mandal says:

    Dear Sir,
    May you provide us teaching / training about Indian stock market.
    Suraj Mandal : 9910821695

  • Kriti says:

    hi kritesh.your post are very helpful to me can you kindly send me complete detail about stock market who dont know the abc of can mail me at

    • Kritesh says:

      Hi Kriti. Glad to hear that you are interested in investing. I am launching a new course on stock market due December’17 for beginners so that they can learn how to invest in the market for consistent returns. You can find the course here.
      In the mean time, you can find this post about fundamental analysis useful. Cheers!

  • T S Venkatesh says:

    Hi Kritesh ji
    Your every word is a learning step,really it is helpful for who wanted to invest in equity market, you have given very good tools to invest.
    Thank you very much

  • prabal says:

    i learnt most of thing from u as i am a beginner

  • Shreyash says:

    Hey can u tell your earning of day trading on monthly basis on an average

  • Chittaranjan Bhattacharya says:

    Hi kritesh,
    You are doing a noble deed and one fine morning after introduction with you to whom I search a long time from when I chited from Bonanza.highly passionate in this market but find none except you only you giving such presentation free of cost which is more important like me ,due to course fees and other charges I forced to keep myself away.
    Today I complete my 3rd lesson awaiting for further lesson to enrich myself and to support others really have the same attitude . Live and let live is my philosoph.’Mabhai,charaibeti, Charaibeti……Basundhyab kutumbakam”

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