Do read the first Part –
Random Portfolio Test– It either Humbles or Humiliates! Part 1 of 3
Before I start this Credit to my team mate Harsh Doshi for doing the Excel Workings.
Main Bola Tha.
This is a disease which is prevalent amongst all Investors and Traders and everyone is at a different stage.
You will see this syndrome when the Markets have done really well.
But all of us love to do it as one cannot Load Enough, Ride Enough, Make Enough in a Bull Market. But we can always Boast about it.
Just do not overdo it.
Random Portfolio Starting Points.
The Random Portfolio returns have been calculated from 4 different starting points to 21st June 2021.
1) 15th Jan 2018 Smallcap Peak 2) 20th Jan 2020 – Pre Covid Peak
3) 24th March 2020 Bottom. 4) 9th November 2020 – When Nifty hit all time high.
The chart above shows the Smallcap Index is finally back to the 2018 tops. The Starting Points have been taken at exact bottoms.
Random Portfolio Filter
- The only filter was stock should be above 5 rs and listed on NSE. ( to remove unusual big movers or duds. We changed this to 5 from 10. )
( We have taken only NSE stocks as BSE has quite a few manipulated stocks and its tough to clean that data. We decide 5 rs as this time around there were 300 + stocks below 10 in March 20 )
- •25 stocks selected randomly ( rand function) with an equal weightage of 4%.
- •Time Period – Different Start Times.
- •No shuffling of stocks. Just buy and hold.
- •No brokerage applied.
- We created 5 random portfolios.
Download the Full Excel Sheet here – Random Portfolio
The Results
Keeping it simple and not comparing to benchmarks. Do remember its a well diversified portfolio with max weightage at 4%. So compare accordingly.
1) January 2018 Peak to Now.
| nooreshtech.co.in | |||
| 15-01-2018 | 21-06-2021 | ||
| Portfolio | Initial Equity | End Equity | % Returns |
| Random Portfolio 1 | 1000000 | 886655 | -11.33% |
| Random Portfolio 2 | 1000000 | 991442 | -0.86% |
| Random Portfolio 3 | 1000000 | 809873 | -19.01% |
| Random Portfolio 4 | 1000000 | 1353269 | 35.33% |
| Random Portfolio 5 | 1000000 | 1200655 | 20.07% |
| Average Returns (%) | 4.8% | ||
| nooreshtech.co.in | |||
Even when you do more iterations there is a huge difference –20% to to + 35%
2) Jan 2020 – Pre Covid Peak to Now.
| nooreshtech.co.in | 20-01-2020 | 21-06-2021 | |
| Portfolio | Initial Equity | End Equity | % Returns |
| Random Portfolio 1 | 1000000 | 1759477 | 75.95% |
| Random Portfolio 2 | 1000000 | 1586307 | 58.63% |
| Random Portfolio 3 | 1000000 | 1530232 | 53.02% |
| Random Portfolio 4 | 1000000 | 1766915 | 76.69% |
| Random Portfolio 5 | 1000000 | 1855706 | 85.57% |
| Average Returns (%) | 70.0% | ||
| nooreshtech.co.in | |||
Not a big variation here.
3) March 2020 – Covid Bottom to Now.
| nooreshtech.co.in | 24-03-2020 | 21-06-2021 | |
| Portfolio | Initial Equity | End Equity | % Returns |
| Random Portfolio 1 | 1000000 | 3081311 | 208.13% |
| Random Portfolio 2 | 1000000 | 3294643 | 229.46% |
| Random Portfolio 3 | 1000000 | 2983074 | 198.31% |
| Random Portfolio 4 | 1000000 | 2833086 | 183.31% |
| Random Portfolio 5 | 1000000 | 2844969 | 184.50% |
| Average Returns (%) | 200.7% | ||
| nooreshtech.co.in | |||
The Minimum Return is 180% !! Does not change much even if you do from exactly a year back or 1st April 2020.
If you are an advisor, fund manager, research analysts, twitter analyst, telegram analysts, whatsapp analyst ! Show returns from April 2020 , June 2020 or last 6 months !!
If you are an investor look at your returns from 2018/2014/2013.
Whatever you look at nothing guarantees future returns – So go back work harder !
4) Nifty ATH to Now.
| nooreshtech.co.in | 09-11-2020 | 21-06-2021 | |
| Portfolio | Initial Equity | End Equity | % Returns |
| Random Portfolio 1 | 1000000 | 1593667 | 59.37% |
| Random Portfolio 2 | 1000000 | 1606084 | 60.61% |
| Random Portfolio 3 | 1000000 | 1899453 | 89.95% |
| Random Portfolio 4 | 1000000 | 1852312 | 85.23% |
| Random Portfolio 5 | 1000000 | 1909201 | 90.92% |
| Average Returns (%) | 77.2% | ||
| nooreshtech.co.in | |||
After a major bottom in place even buying at an all time high is a good place to start. Can go back and see even 2005 or 2014.
The last 6-8 months have been super for the Smallcaps/Midcaps which have played a big Catch Up. So Maine Bola Tha will keep increasing.
Some Timepass Messages
Maine Bola Tha !! -
Teji Me Laav Laav – Mandi Main Mu Kaala.
Teji Me Ghode Daudte Hai aur Gadhe to Udte Hai
Teji Me Itna Loot Lo Ki Mandi Se Farak Na Pade.
Random Portfolio Learnings
- In a diversified Portfolio its more about Asset Allocation and Timing and not as much about Selection. ( In March 2020 or say Sept 2013 it is not a selection problem but lack of enough Capital. )
- The Returns will be great in a Cycle but What is your Equity Allocation as a % of your networth will decide How much your Life Changes.
- In every Cycle all we have learnt One needs to take a leap of faith and let winners ride. Every Portfolio in the Random Exercise you will see 1-2-5 big winners that make the difference.
- It is easier for an Excel Portfolio to ride winners but extremely difficult for an investor. Just like Maine Bola Tha is easy but to Buy and Hold extremely difficult even for the Bolnewala.
- Selling Half to make it Free is the Worst Strategy in a Bull Cycle unless you are taking that half out of the Market forever or for a long time.
- We need to accept the Element of Luck , Timing and Bull Sentiment in our Returns. Liquidity and Sentiment is like Water to Farming, Gardening.
- One of My Mentor used to say this in Bear Markets” Baarish aati Hai har saal Kam Ya Jyaada agar iss saal Nahi to agle nahi to uske baad.“ You got to keep Faith and Sow your Seeds & Take Care of your Farm.
- The Market has never been so Kind to a New Investor or Investments in last 1-1.5 year. Accept it and be Grateful instead of thinking you are Genius ( More on this in next Post.)
- My personal learning has been that – We worry too much about Stock Selection. But its all About Timing !! … You can pick any date from March 2020 to December 2020 – You have a 100% chance of positive Return on a Random Portfolio!.
- If you can tweak your Asset Allocation more towards Equity at Right Time that can be a bigger difference than stock Selection. For Example even Buying in November 2020 would give you a 50-80% return in 8 months. Do read this post in November 2020 - Nifty up But Stocks are Down !!. Time for Stocks to Catch Up in coming years.
- Nobody encourages Timing the Markets as One can be Terribly Wrong to Extremely Right and that could hurt real bad. But its not as difficult to be somewhere in between.
The 3rd Part of this Series should also be out in a couple of days. That will be again super interesting.
If you did like the post – Share and Comment. Can also mail me on nooreshtech@analyseindia.com or whatsapp on 7977801488
June 23, 2021
Is it advisory services , if yes what is the procedure
June 29, 2021
Excellent article Nooresh! During heavy rain small ponds overflow with water but they are not for investors. Only for short term traders. We see portfolio return presentation from all Fund houses and also portfolio managers. They were not at all in picture to show 1-2 year return in March-July 2020. I also fully agree with “Selling Half to make it Free is the Worst Strategy in a Bull Cycle unless you are taking that half out of the Market forever or for a long time.” Trader sells with 10-15 return in one share and invest again in a share which is already almost peaked. I am glad to see you in ET TV daily. Congratulations!
July 7, 2021
Thanks for your comment Andrew.