January 2, 2018

Nooreshtech: Diversified Random Portfolio beats the Benchmarks Yet Again


  • 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.


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