Stock Portfolio Update November 2018 (Lazy Investing)

Last Updated on

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.

Stock Portfolio Update November 2018 (Lazy Investing)

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

Watch my talk on index investing: Can we get higher returns with lower risk?

List of Index Mutual Funds and ETFs in India: What to choose and what to avoid

Can I start Index investing with 50% Nifty 50 and 50% Nifty Next 50?

List of funds that have outperformed Nifty 200 & Nifty Midcap 150 Total Return Indices

Index Investing: advantages and disadvantages of being a passive investor

How new stock investors can quickly start investing using NIFTY Multi-Factor Indices

Are Nifty Smart Beta (strategic) Indices better than the Nifty Next 50?

Warning! Nifty Next 50 is NOT a large-cap index!

Nifty 50 Equal Weight Index vs Nifty 50: Does equal weight result in more returns?

Nifty Next 50: The Benchmark Index That No Mutual Fund Would Touch?!

What is the best way to invest in Nifty Next 50 Index?

Let us dive into the five test portfolios

Test Portfolio Rules

1: Check the monthly list of stocks for each index from the NSE website

2: If current stocks in the test portfolio are part of the index, buy one stock of each.

3: If current stocks in the test portfolio have been removed from the index, sell it and buy the same no of stocks +1 appropriately. For example, the changes in the Nifty Next 50 for this month are shown below. JSW Steel has been removed from the top of the index. So I sold those 4 stocks and (test) purchased  Lupin instead (a new entry). Then added one more stock of Lupin (4+1) for this months quota. In the tables below, stocks in red have been sold and stock have in blue are new entries.

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.

6:  The holdings shown as “zero” represent stocks that have now been sold.

Pros: Stock selection is trivial as long as you do not mind the price at which you buy. The stocks from the strategic indices are solid names and I believe are a good buy at any price.

Cons: As pointed out by readers before, because I chose to buy one stock each, the weights are imbalanced in favour of some stocks. I start correcting for this from the next month.

Test portfolio 1: Ten stocks from the top of Nifty Next 50

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.

Test portfolio 1: Ten stocks from the top of Nifty Next 50

Graph of Test portfolio 1: Ten stocks from the top of Nifty Next 50

Test Stock Portfolio 2: Ten stocks from the bottom of Nifty Next 50

The idea here is to have a mid-capish portfolio with higher risk and possibly higher reward than the NN50. 

Test Stock Portfolio 2: Ten stocks from the bottom of Nifty Next 50

graph of Test Stock Portfolio 2: Ten stocks from the bottom of Nifty Next 50

Test stock Portfolio 3: Ten stocks from NIFTY 100 Low-Volatility 30

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

Test stock Portfolio 3: Ten stocks from NIFTY 100 Low-Volatility 30

graph of Test stock Portfolio 3: Ten stocks from NIFTY 100 Low-Volatility 30

Test Stock Portfolio 4: Ten stocks from NIFTY Alpha Quality Value Low-Volatility 30

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.

Test Stock Portfolio 4: Ten stocks from NIFTY Alpha Quality Value Low-Volatility 30

graph of Test Stock Portfolio 4: Ten stocks from NIFTY Alpha Quality Value Low-Volatility 30

Test Stock Portfolio 5: Ten stocks from Nifty Low Volatility 50

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).

Test Stock Portfolio 5: Ten stocks from Nifty Low Volatility 50

graph of Test Stock Portfolio 5: Ten stocks from Nifty Low Volatility 50

So the plan now is to keep updating this and see how it goes. These test portfolios essentially focus on the stock selection and not the portfolio build (as that is terribly overweight)

Do share if you found this useful

About the Author M Pattabiraman author of freefincal.comM. Pattabiraman(PhD) is the author and owner of freefincal.com.  He is an associate professor at the Indian Institute of Technology, Madras since Aug 2006. Pattu” as he is popularly known, has co-authored two print-books, You can be rich too with goal based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management.  He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. Pattu publishes unbiased, promotion-free research, analysis and holistic money management advice. Freefincal serves more than one million readers a year (2.5 million page views) with numbers based analysis on topical issues and has more than a 100 free calculators on different aspects of insurance and investment analysis. He conducts free money management sessions for corporates  and associations(see details below). Previous engagements include World Bank, RBI, BHEL, Asian Paints, TamilNadu Investors Association etc. Contact information: freefincal {at} Gmail {dot} com (sponsored posts or paid collaborations will not be entertained)
Want to conduct a sales-free "basics of money management" session in your office?
I conduct free seminars to employees or societies. Only the very basics and getting-started steps are discussed (no scary math):For example: How to define financial goals, how to save tax with a clear goal in mind; How to use a credit card for maximum benefit; When to buy a house; How to start investing; where to invest; how to invest for and after retirement etc. depending on the audience. If you are interested, you can contact me: freefincal [at] Gmail [dot] com. I can do the talk via conferencing software, so there is no cost for your company. If you want me to travel, you need to cover my airfare (I live in Chennai)

Connect with us on social media


Content Policy

Freefincal has original unbiased, conflict-of-interest-free,  topical reports, reviews, commentary and analysis on all aspects of personal finance like mutual funds, stocks, insurance etc. All guest authors and contributors to the site also do not have any conflict of interest. If you find the content useful, please consider supporting us by (1) sharing our articles and (2) disabling ad-blockers for our site if you are using one. No promotional content We do not accept sponsored posts and link exchange requests from content writers and agencies. This is our privacy policy Our website is non-profit in nature. The revenue from the advertisement will only be used for hosting charges, domain registration charges, specific plugins necessary for traffic growth and analytics services for search engine optimisation.

Do check out my books


You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingMy first book is meant to help you ask the right questions, seek the right answers and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.  It is also available in Kindle format.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You WantGamechanger: Forget Start-ups, Join Corporate and 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 young earner

The ultimate guide to travel by Pranav Surya

Travel-Training-Kit-Cover This 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 Phone

All 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)

Blog Comment Policy

Your thoughts are vital to the health of this blog and are the driving force behind the analysis and calculators that you see here. We welcome criticism and differing opinions. I will do my very best to respond to all comments asap. Please do not include hyperlinks or email ids in the comment body. Such comments will be moderated and I reserve the right to delete the entire comment or remove the links before approving them.

Leave a Reply

Your email address will not be published. Required fields are marked *