- A diversified random portfolio would have given a return of 52-60% which is much higher than the Nifty/Sensex/BSE 500/Midcap etc and almost close to the BSE Smallcap/Nifty Smallcap even though the universe is almost all listed stocks.
- A little more concentrated portfolio would have given much more higher returns.
- A constant learning through all these exercises is that Selection is very important in a Concentrated Portfolio but in a Diversified Portfolio the Asset Allocation and timing plays the real tool. Consider if you had deployed more cash in Demonetization – Nov/Dec 2016 would it really matter what stocks you selected ?
- In such times it becomes easy for advisers, analysts, pms and mutual funds to show how superior their returns are to the benchmark – Nifty. If 42% of the stocks went more than 50% there is a good chance every smallcap/midcap pf made that sort of return as there will definitely be some outliers which went up 100% ( 1 out of 5 stocks doubled up )
- The above exercise clearly tells us to be thankful to the market for being so kind in giving returns irrespective of whether it was luck or skill.
Read more at http://www.nooreshtech.co.in/2018/01/diversified-random-portfolio-beats-the-benchmarks-yet-again.html