Coffee Can Portfolio: Shares for investment, How to choose?

Coffee Can Portfolio Coffee Can Portfolio is a method of investing in stocks that are fundamentally very strong and investing in the long run, just as investing in a company's stock is based on value. The term coffee can investing was first coined by Robert G. Kirby in 1984, about 40 years ago. In ancient times it was customary in Western America for households to put important items in coffee cans. These cans were hidden under the mattress in the bedroom. The coffee can, which is kept under the pillow or mattress for safety, will be there for years. It has been in high circulation until the banking practice (savings and safe deposit box facility) became popular. In our town, Indian mothers used to save money in pantry, rice cans, mustard cans, etc., and then use it to invest in gold, land, etc., by putting important items in a coffee can and safely hiding it under the mattress. Just like putting important items in a coffee can and hiding them under a bed mattress for a long time, investing in well-functioning company stocks and continuing to do so for a long time is called a coffee can investment mix. How did this investment system come to India? This method has been very successful in the United States. This investment method has been popularized by Sourav Mukherjee, a leading investment expert who has written a comprehensive book on the 'Coffee Can Investing' method in India The coffee can portfolio is an investment strategy. Of these, the key aspect of this strategy is to minimize risk and maximize profitability by investing in good company stocks for at least 10 years. Stocks are often bought and sold frequently in this investment strategy. If you buy a stock you should continue to invest for the long term. Almost buy stocks and forget about them for a long time to come. In this stock investment system, more emphasis is given to stock selection. There is no need to pay much attention to the performance of these company stocks as often as regular stock investing. Generally, an investment of more than 5 years is considered long-term and an investment of more than 10 years is considered very long-term. The book Coffee Can Investing describes in detail how Indians can make a profit by following the coffee can investment method. Coffee can investing is defined as investing in shares of a company that have more than 15 percent return on capital each year. That is, it is an investment approach to creating immense wealth at low risk. Profitable investment The stock market is a long-term investment. The stock market has been experiencing high volatility in the short term but in the long run it has been yielding an average return of more than 12% to 15% per annum, higher than the inflation rate. Also, the dividends and bonus shares they pay when they are the best performing companies may make the stock investment more profitable. The quality of the stock is of paramount importance in this investment system. That too must be fundamentally strong. How to choose the role? 1. The company must have been in operation for at least 10 years. 2. The company's revenue growth should be at least 10 percent per annum. This is not the Compound Annual Growth Rate (CAGR). There should be growth of 10 per cent and above every year. 3. Return on capital employed (ROCE) should be at least 15% over the last 10 years. 4. The market capitalization of the company's stock is Rs. Should be more than 100 crore. 5. Must have good brand value. 6. Must have the ability to deal effectively with competing companies. The cost of raising capital ..! A company is good if it makes more profit than the cost of raising capital (Cost of Fund / Capital). For example, a company raises capital (debt) at 12% interest. If the profit of that company is 24% then this company can be said to be a good profitable company. The lower the cost of raising capital, the easier it will be for the company to compete with other companies. Next one cannot invest in a company’s stock solely on the basis that it has performed well in the past. Investing will only be profitable if that activity and profitability continue in the future. At the same time as looking at a company's performance over the past decade, it should only look at investing in that company's stock if it is confident that the company will perform well in its affiliate / business over the next ten years. A company that is unique is better suited for investment than a company that is the largest in a particular sector. The reason is that a large company is subject to change. But, uniqueness will remain constant. A company can keep a fixed price for its products and find out what condition it is in. Only unique companies will continue to sell products at premium prices. Do not decide to look at the production cost of a company alone. Look at how much it costs its competing companies in the same field. Only four of the 50 companies listed on the Nifty 50 index are able to choose according to the terms of the Coffee Can Investing System. Those companies are Asian Paints, Lupine Pharma, HDL Technologies and ITC. Screener Dot's website helps to select company shares under the Coffee Can Investing System (by Sourav Mukherjee). The link is About 4800 companies are listed on the Indian Stock Exchange. Only about 150 of these stocks are eligible for investment under the Coffee Cane portfolio. Screener Dot's website lets you choose the stocks that are right for you in these companies. For example, with a market capitalization of over Rs 1,000 crore, ROCE can choose only those stocks with a sales growth of over 20% and sales growth of over 15%. How to invest? You can invest in this coffee can portfolio in the form of Systematic Investment Plan (SIP), which is widely used in mutual fund investing. Just as all funds have SIP facility in mutual fund investment, not all companies have equity SIP facility. Only a few leading stockbroking companies offer SIP investment in stocks. You can invest this number of shares per month in this facility. If your broker does not have this facility then you are the one who has to buy a certain number of shares every month. You can also invest in bulk once a year in the company stocks you have selected for your coffee can portfolio. Money and bonuses available in addition to salary can be used for this investment method. Also, you can get high returns in the long run if you buy everything together when you see the price of the shares of the company featured in your coffee can portfolio on the downside of the overall stock market. Reduce risk ..! It is necessary to divide the investment into shares of different sectoral companies to reduce the risk on the investment. 10 to 15 shares may be in one's coffee can portfolio. Beyond that it can be a difficult thing to look after and manage the investment mix. Although a long-term investment, once a year, the investment mix can be scrutinized and the dysfunctional, troubled company in future growth can be excluded from the investment mix. This coffee can investment combination has the potential to yield more returns than index mutual funds. The reason is that you have researched and selected more good company stocks among the good company stocks listed in the index. Suitable for whom? If the market has seen a sharp decline in coffee can portfolio, it will take more years to recover. In that sense, it is possible to have more patience and invest more in market downturns. Inactive income This stock investment scheme can be considered if the investment period is at least 10 years. Passive Income is an investment and investment method suitable for long-term prospects. At the same time, if you do not have enough knowledge and experience about stock selection you can create a coffee can portfolio with the help of the best stock market experts / stock brokers. How much can you invest? If you like the coffee can portfolio, put only about 10% to 15% of your total investment in the first place. Increase investment if that experience is good. Since stocks are not often bought or sold frequently in this investment system, the cost of the investment will be limited to the demat annual maintenance fee (approximately Rs.300 to Rs.500) and the stock brokerage fee (typically 0.25% -1% of the transaction amount). Including new companies that fall under the Coffee Can Investing Regulation into your investment mix can also increase gross returns.

1 comment:

  1. Nice Post! Thanks for sharing great information about free Stock Market tips

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