How Can I Invest My Lump Sum Money In A Tax-Efficient Way?

Ans: You have a Rs 5 lakh stock portfolio.
You are investing Rs 10,000 in each stock.
You are getting around 30% returns, but you are not fully happy.

Let me help you with detailed insights.

Appreciating Your Journey So Far

You started investing in 2017, which shows good discipline.

Growing the portfolio with regular Rs 10,000 investments is a smart habit.

Earning 30% returns is not bad, especially in Indian stock markets.

Many investors struggle even to beat inflation in long-term investing.

You deserve appreciation for steady progress and patience.

Understanding Your Concern

You want even better returns than 30%.

You feel Rs 10,000 in each stock is limiting your potential.

You are looking for an ideal number of stocks for higher growth.

Ideal Number of Stocks to Hold

If portfolio is Rs 5 lakh, then having 15 to 20 stocks is healthy.

Less than 10 stocks can make portfolio risky and unstable.

More than 25 stocks will dilute returns and weaken performance.

Around 18 stocks can give you good balance of safety and growth.

Each stock can ideally carry 4% to 7% weight in your portfolio.

Problems of Over-Diversification

Holding too many stocks reduces focus.

Monitoring all stocks becomes difficult.

Even if some stocks do well, overall portfolio may not reflect it.

Returns get pulled down when poor stocks dilute the strong ones.

Problems of Under-Diversification

Too few stocks increase risks sharply.

Bad performance of one stock hits portfolio badly.

Emotional decision making becomes harder.

Volatility can become scary during market falls.

Fine-Tuning Your Approach

Increase your per stock investment slightly to Rs 15,000 to Rs 20,000.

Focus on holding 15 to 20 strong companies across sectors.

Prioritise companies with strong balance sheet and consistent profits.

Look for companies with leadership in their industries.

Reduce churning of stocks; stay invested patiently.

Sector Allocation Guidance

Allocate across banking, FMCG, pharma, IT, auto, and energy sectors.

Avoid over-investing in one sector or theme.

Always maintain sector diversification for stability.

Reviewing Your Return Expectations

Expecting more than 30% return consistently can be risky.

Stock market returns move in cycles.

In good years, 40%-60% returns may happen.

In bad years, even negative returns can occur.

Long-term average return expectation should be around 12%-18%.

Identifying the Real Issue

30% growth is a strong outcome compared to bank FDs and debt funds.

If you feel unhappy, maybe it is because of high expectations.

Managing emotions is key to wealth creation.

Recommended Action Plan

Stick to around 18 focused high-quality stocks.

Increase amount slightly if you find very strong companies.

Focus on strong fundamentals, not just price movements.

Rebalance portfolio once in a year to maintain sector weight.

Invest fresh money slowly when good opportunities arise.

Additional Important Points

Don't take high risks to chase higher returns.

Wealth building is a marathon, not a sprint.

Stay disciplined and trust your process.

Consistency will reward you richly in next 5-10 years.

Final Insights

Holding around 15-20 carefully selected stocks is ideal for you.

Focus more on quality stocks than chasing return numbers.

Growing wealth steadily is more important than chasing quick profits.

Stay invested with a cool mind, and you will achieve great success.

Celebrate your discipline till now and keep improving step-by-step.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment