Readers may be aware that from June 2018, I have started testing five stock portfolios based on NSE indices. Their current status is reported in this post. Three of them are based on smart beta (active + passive) indices and two on a passive index. The main aim is to find out (after the lapse of a few years) how effective a lazy investing stock picking strategy is.
There are two important warnings.
I have no skin in the game. These are purely imaginary portfolios created at Value Research. I have nothing to lose here. If the portfolios work, I will write a post about it. If they fail, I will write a post about it.
These are NOT stock recommendations. They are experimental portfolios and I am running a test. I invite you to study them with me. Do not put your money based on these posts alone. Please carry out due diligence.
Readers may be aware that I have been covering Nifty active and passive index performance from time. Although I recommend index investing (in Nifty Next 50) only for less than 25-year-olds, many readers of all age groups have taken to it. If you are just joining in, I strongly recommend that you read the following posts before proceeding
Let us dive into the five test portfolios
1 NIfty Low Volatility 50 (top 10)*
The NIfty Low Volatility 50 is a set of 50 stocks (from top 300 stocks by market cap) with least fluctuations in monthly returns considered over the last one year period (trailing). So in June 2018, I looked at the monthly factsheet and invested in the top 10 stocks (one stock each) by weight (least volatile stocks occupies more weight).
Why? Because choosing low volatility stocks is a simple, yet rewarding way to beat market cap based indices at lower risk (see links above).
Rules from now on
1: Get the Nifty Low Vol 50 factsheet published each month end along with the full list of stocks in the index (see links below). This list will not have weight information.
2: Check if the stocks currently held are in the top 10 (by weight) as mentioned in the fact sheet. If not, check if there are in the full list.
3: As long as an existing stock in the portfolio is present in the index (full list), buy one more. * I changed this rule so that sell transactions are minimised (from July to June 3-5 stocks have moved out of the top 10) So we started with the top 10 in June 2018 and will continue to hold them as long as they are part of the index. If they are removed from the index, we will replace them with a stock from the top 10 (with the highest weight).
4: The portfolio will always have 10 stocks only. The STCG or LTCG paid will be accounted for at the end of each FY.
5: The portfolio will be updated each month.
2 Nifty 100 Low Volatility 30 (top 10)
This picks the 30 least volatile stocks from the NIfty top 100 index. We started with the top 10 in June 2018 and will follow the same rules as above.
Why? Same reason as above. It is quite possible that this portfolio will have significant overlap with the Top ten from Low Vol 50.
1: Get the Nifty 100 Low Vol 30 factsheet published each month end along with the full list of stocks in the index (see links below) and follow the same rules as above.
3 NIFTY Alpha Quality Value Low-Volatility 30 (top 10)*
NIFTY Alpha Quality Value Low-Volatility 30 Index consists of 30 stocks selected from NIFTY 100 and NIFTY Midcap 50 and reflects the performance of a portfolio of stocks selected based on
the top combination of Alpha, Quality, Value and Low-Volatility. You can read more about its performance in the links above.
Why? Best of all worlds – Growth investing + Value investing + low volatility.
1: Get the NIFTY Alpha Quality Value Low-Volatility 30 factsheet published each month end along with the full list of stocks in the index (see links below) and follow the same rules as above.
4 Nifty Next 50 (Top 10)*
The Nifty Next 50 (NN50) is the bottom 50 of the top 100 stocks arranged by market cap. So we get the index weights and after a bit of processing end up with this table. Notice the huge difference in market cap as we go down the index. A literal reason why I keep saying NN50 is not a large-cap index.
Why top 10? I see it as a lower risk, lower reward variant of the NN50.
5 Nifty Next 50 (bottom 10)*
The idea here is to have a mid-capish portfolio with higher risk and possibly higher reward than the NN50.
It takes about ten times less to buy the NN50-bottom-10 compared to the NN50-top-10. This huge spread in market cap is again the reason for its special nature.
What is the plan now?
1: Post updates each month.
2: Periodically compare with respective indices and some active mutual funds.
Let us see what happens. So far so good I think.
Lazy Investing Resources Aug 2018
The full list of stocks: Nifty Low Volatility 50
The full list of stocks: Nifty 100 Low Volatility 30
The full list of stocks: Nifty Alpha Value Quality Low Volatility 30
The full list of stocks with weights: Nifty Next 50
Factsheet: Nifty Low Volatility 50
Factsheet: Nifty 100 Low Volatility 30
Factsheet: Nifty Alpha Value Quality Low Volatility 30
Factsheet: Nifty Next 50
All documents are sourced from the NSE.
Subscribe and join the freefincal Youtube community!
Connect with us on social media
- Twitter @freefincal
- Subscribe to our Youtube Videos
- Posts feed via: Feedburner
- We are also on Google PlusandPinterest
Do check out my books
Get it now. It is also available in Kindle format.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You WantMy second book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at low cost! Get it or gift it to a youngearner
The ultimate guide to travel by Pranav SuryaThis is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for ₹199 (instant download)
Free Apps for your Android PhoneAll calculators from our book, “You can be Rich Too” are now available on Google Play!
Install Financial Freedom App! (Google Play Store)
Install Freefincal Retirement Planner App! (Google Play Store)
Find out if you have enough to say "FU" to your employer (Google Play Store)