In the last couple of months you will notice a few common things.
1) Value Investment Advisors showing their 1 year performance returns.
2) Technical Analyst Advisors showing monthly/quarterly/annual performance.
3) Fund Management Companies coming out with New Closed Ended Schemes/NFOs/ and products for Equity.
4) New Breed of Geniuses calling themselves Value Investors/Quant Investors/Technical Traders/Day Traders and talking about great returns.
5) Quite a lot of people will sell you Mentoring Courses/Wealth & Money Workshops/SuperMind/Art of Investing Workshops.
6) A lot of presentations on how Equities have given Super Returns ( you might have seen that it was better to buy Maruti shares instead of Maruti Car)
7) A lot of Marketing Calls from Advisory Companies promising 20% returns a month on a 50k portfolio ( Actually such a call has only triggered this boring and bullshit post )
There will be early Bird Discounts , more 1 pe 1 free and othe
You are and will continue to receive following things
E-mails with subjects like
1) How i made 60-100% in 4 months.
2) Hidden Smallcaps and Multibaggers – Last few days to subscribe
3) Investing Secrets
4) Quadruple your Money
5) Investing Course for your Mind
6) Power of Technical Analysis
7) Trading Coach/Life Coach
8) Mentoring from Masters.
1) Get the next results breakout which will be up 10%
2) Our DLF Put Option made 24 lakhs on 2 lakhs Capital.
3) Sure Shot Operator Calls.
1) Kya aap equity market me trade karte hai ?
2) Monthly 20% Return mil jayega sir
3) Minimum Investment 50k sir bas. Charges 5k a month.
4) Our Option Call went up 10 times sir.
These things have been around for a really long time but we see a lot of companies getting floated in Advisory/Planning/Training/Mentoring and use a lot of Marketing to tempt people.
This is what a Bull Market does. Everyone boasts about their calls – The most used words - Maine Bola tha.
Also the performance reports are a good way to sell your product whether it will work or not in the future.
So think hard before you go for anything as we don't believe the Bull Markets are ending. There will be more choices then ever.
Next 6 months may not be like the previous 6 months but next few years there will be a lot of opportunities.
How to go about your Investment Decisions and Spending your Money is your choice.
All i can say is give it an equal amount of time as you do while buying a New Phone.
( Its a fact we spend more time selecting Phones/Laptops/Gadgets which are going to be worth 50-70% lower than on investment decisions like equities,gold,real estate, fds,ppf or trading decisions or trainings which can increase in value of yourself and your money)
So let me get to the real topic which i wanted to discuss.
The last year has been a good one and everyone is happy unless you are invested in companies like dlf,unitech and previous infra heroes who have been killed.
So let us look at what are the benchmark returns and an interesting work we had done a few weeks back.
The time frame taken was Sept 24th 2013 to Sept 24th 2014.
6 Months returns
|Index||Start Price||End Price||% Returns|
12 Months Returns
|Index||Start Price||End Price||% Returns|
These were benchmark index returns which are superb in last 1 year the Midcap Index only went up by 69%.
Now stocks can be picked up on various ways right – Fundamentals, Value Investing, Broker Tips, Hidden Gems, Technicals, Quants, Gut Feel, Operator news.
Everyone of them has been boasting about it.
Now above approaches need a lot of work to be done to increase performance.
So let us look at what happens if you pick stocks randomly with none of the above being used.
The Random Portfolio
I have been working on this interesting topic of Random Portfolio Selection with a friend Prashant Krish ( twitter account - @Prashanth_Krish ) for past many months had has helped me a lot in strategizing.
The thought was about how a chance portfolio performs against benchmarks. ( Read this old post )
Below is the recent working which was done.
We decided to create a chance portfolio picked up randomly. Below is the detailed working on it.
Random Portfolio Selection Filter
•The only filter was stock should be above 50 rs and listed on NSE. ( to remove unusual big movers )
•25 stocks selected randomly ( rand function) with an equal weightage of 4%.
•Time Period – Last 6 months and Year to Date.
•No shuffling of stocks. Just buy and hold.
•No brokerage applied.
We created 5 random portfolios on the above selection criteria. .
Now the question was how much should it underperform a portfolio created using.
Fundamentals, Value Investing, Broker Tips, Hidden Gems, Technicals, Quants, Gut Feel, Operator news.
Before we go to the results some questions.
( I would suggest you to take a pen and paper and write your answers before you read ahead)
How much underperformance by this Random Method ?
What is your approximate return in last 6 months/12 months ?
What is the performance of various boasting chaps on a net portfolio basis in absolute terms ( No CAGR for 1 yr)?
Do you believe the Strategy you use has been the best?
If you have written down the answers than the following data will hit your nerves.
6 Months Return of Random Portfolio
12 Months Return of Random Portfolio
How does this 133% return happen in last 1 year.
There have been a lot of multifold moves in many stocks with Midcap Smallcap Index being up 70-90%.
The money is made on just riding on some of this moves ( the most difficult thing to do ). One stock going up 5 times on a 4% weightage implies a 20% positive impact on the portfolio.
The excel sheet for the whole calculation
Random Portfolio Excel Sheet
There are a few entries which could be data mistakes which have been highlighted and impact has been cut.
The above work has helped me in my strategy.
My Small Learnings after looking into the Random Portfolio Workings since April-May.
1) We were pretty bullish going into Elections – ( Read this report ) . We had a purple patch with good recommendations and superb returns in our portfolio.It was a humbling experience to see even Random Return was more or less close to our Returns. We did not get over confident and helped booking some profits and hedging.
2) In a Bull Market one just needs to ride. ( Did ride but not enough )
3) Work on your trading/investing strategies and process. Let market decide the return.
4) Work on Allocation. ( How to deploy 15-20% or more into a high conviction stock. Still working on it )
5) The Market is supreme and provides the return in good times to even bad processes.
( Suzlon went up 5 times )
As Warren Buffet says
“ Only when the tide goes out do you discover who's been swimming naked “
This is the best time for advisors to show their Performance.
Sell Equity Related Products. ( As mentioned in start of the Post )
Use the best marketing and spamming techniques if you are in the business.
Even We are in the profession of Advising for last 8 years.
Even a broken clock is write twice in the day.
Few unusual things we did last year and more are planned ahead.
1) We increased prices of our Advisory Services a few months back instead of giving discounts.
2) Started screening clients on capital size/ expectations and rejecting clients instead of marketing. ( We did have a marketing team for a year or two in 2010-2011. Now none )
3)) We will increase prices of our Trainings a in next Financial Year.
But we are planning some interesting on Training before we increase prices which will be posted soon.
Do post your comments or mail me on firstname.lastname@example.org