Thread by @kirubaakaran

How to beat the Index? From retail #investors to large fund house, everyone is trying to beat the index. It just means, making more or less similar returns to #Nifty but with lower risk. How does a retail investor can make better returns than index with lesser volatility?

Consider a year like 2008, where Nifty itself crashed more than -52% and many other mid cap and small cap stocks have lost more than 70–80% in that year alone. Any investor, who sees their fund value going down more than half, would never step back into the markets again.

Nifty Bees yearly returns since 2008. One lakh invested in the index in year 2008 would have grown to 2.3 lacs by end of 2019. But this return comes with a huge draw down of more than -52% in the year 2008

What if we can make a similar returns but with least risk, bringing down the volatility to a greater extent? Instead of investing only in Equity, if we could diversify into different asset classes, we can generate similar returns with less volatility.

So let's consider investing in Equity, Gold and Fixed Income. Let's see what's the historical returns of each asset class.

And liquid bees generates around 6% per year on an average. Combining all these instruments will generate a well diversified portfolio. Thanks to my friend @vishalmehta29 who suggested me this diversified allocation during one of our weekend discussions.

Since we have ETF for all these three asset classes, it's much easier for us to diversify. All we have to do is invest in the following ETFs
1. Nifty Bees (17.5%)
2. Nifty Junior Bees (17.5%)
3. Gold Bees (35%)
4. Liquid Bees(30%)

Consider you have 1 lac capital,
then invest Rs.17,500 in Nifty Bees,
another Rs.17,500 in Junior Bees,
Rs.35,000 in Goldbees and
Rs.30,000 in Liquidbees.

If we followed the above diversified allocation from 2008 to 2019, One lakh invested in the portfolio in year 2008 would have grown to around 2.32 lacs by end of 2019, the returns are almost same as investing in equity only, but we achieved this returns with the max risk of -10%

With investing only in #Equity, our risk exposure are very high, bringing in #Goldbees will offset some of the losses we might face during hard times in equity markets, and #liquidbees should generate fixed constant returns year after year.

Everyone wants small cap returns with large cap draw down. By following the above approach, it is much simpler for any retail investors to generate better returns with least draw down. Deatiled blog post here squareoff.in/single-post/Ho…