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 Image
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. ImageImage
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% Image
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…

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More from @kirubaakaran

Sep 26
Historically it has never happened in the past, so probability of such event happening in the future is very minimal. If you trade based on this approach, it could bring in catastrophic results. Here's a story of a hedge fund manager who lost millions because of such approach 🧵
There is a very famous American Hedge fund manager who made 30% annualised return for 20 years, One lac invested with this trader would have grown to almost 2 Crores in 20 year period. He is the famous legendary trader Victor Niederhoffer who failed to follow his own rules.
One day in all his investors received a mail which states that the fund has lost all the investors money & wiped out completely.
"We took risks. We were successful for a long time. This time we did not succeed, and I regret to say that all of us have suffered very large losses."
Read 21 tweets
Sep 23
When people talk about automated trading system, this is what comes to mind for most of the beginners who wanted to get into it. Many think it’s a plug n play system where you deposit the funds, link your account to the algo and it will trade for you n make money every month. 🧵 Image
No! It doesn’t work like that. Algo trading is not money making machine and it doesn’t remove emotions. Whether its Auto trading or manual trading, emotions will always be there when it comes to trading. We can’t ignore it.
This is the expectation most people have when they start with automated trading system. Where you wanted your capital to appreciate month on month, year on year with such linear returns. Image
Read 9 tweets
Aug 28
I once read this story on Reddit long back and wanted to share that, because I could completely relate this to trading. An Airbus 380 is on its way across the Atlantic. It flies consistently at 800 km/h at 35,000 feet when suddenly Fighter Jets appears. 🧵
The pilot of the fighter jet slows down, flies alongside the Airbus, and greets the pilot of the passenger plane by radio:

"Airbus, boring long flight, isn't it? Now, have a look here!"
He rolls his jet on its back, accelerates, breaks through the sound barrier, rises rapidly to a dizzying height, and then swoops down almost to sea level in a breathtaking dive. He loops back next to the Airbus and asks,

"Well, how was that?"
Read 22 tweets
Jul 29
I have shared multiple information related to trading and investing through my historical data analysis by writing various articles, here's the master thread that contains all my work in one place.🧵
Read 25 tweets
Jul 12
I have closely observed FinNifty for couple of weeks and then started trading live since last 4 expiry. If you are looking to start trading with FinNifty weekly option then this thread might be of great help to you. 🧵
Nifty Financial Services Index includes stocks from Banks, housing finance, NBFCs, Insurance and other financial services. But more than 60% of weightage goes to banking stocks whereas with Bank Nifty 100% of stocks belongs to banking category.
These are the top 10 stocks that decides the direction of FinNifty.
Read 14 tweets
Jul 12
Here's some lesser known facts about Youtube which we use every single day. Youtube has 2.5 billion active monthly users worldwide. India tops the list with 467 Mn users, followed by USA with 247 Mn users.
But in India, only 8 lacs users have Youtube premium subscription that is just 0.2% of total users in India whereas in USA more than 29.5 Mn users have Youtube premium subscriptions. Out of 50 Mn premiums users worldwide half of them are from USA. What does it say?
Western countries value time more than us. We are ready to watch cringe ads for 5 seconds every time we watch a video. We are not ready to pay mere Rs.150 per month for ads free access, that's just Rs.5 per day. Whereas in US, it costs $12 per month, still they are ready to pay.
Read 8 tweets

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