It is crucial that investors have a strategic perspective when it comes to equity investing. Portfolio weighting strategy is often ignored by a majority of investors in their initial investment strategy. Yogesh Supekar & Tanay Loya bring forth the huge benefits of focusing on portfolio weights of individual stocks for beating the markets.
Markets are at record highs globally and Indian equity markets are no exception. In spite of such a spectacular upmove in the stock prices, you will find that majority of the investors are not able to outperform the relevant benchmark index. Even for a professional fund manager, it is a tough challenge to outperform the benchmark index consistently over a long period of time. The fact that almost 58 per cent of large-cap oriented mutual fund schemes have not been able to outperform their benchmark indices when we consider a ten-year period speaks volumes on the chances of beating the markets.
Why are investors not able to outperform even in a bull market phase that we are in currently? What determines portfolio performance? Is stock selection and market timing the ultimate mantra for beating the markets? Or is there something more to ‘portfolio outperformance’ than simply identifying stocks and timing the market right? Well, we have observed that investors tend to focus only on certain aspects of portfolio management and ignore some of the most essential aspects over time.
To understand what determines performance of a portfolio, one must simply focus on the basics of portfolio management and get every aspect of portfolio management correct. This way the odds of beating the market increases manifold. There are very many investors who do not even adopt a portfolio approach in equity markets and are prone to participate in markets randomly.
Our observation after interacting with lakhs of investors over the past decades suggests that investors err on portfolio construction and majority of the investors do not allow their investments to grow. In other words, majority of the investors take a short-term approach towards equity investments and this is at the root of a big chunk of the underperformance.
Denne historien er fra November 26, 2017-utgaven av Dalal Street Investment Journal.
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Denne historien er fra November 26, 2017-utgaven av Dalal Street Investment Journal.
Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.
Allerede abonnent? Logg på
How To Invest In An Ageing Bull Market
Bull rallies (periods when stock prices rise) and bear declines (periods when stock prices fall) are natural parts of stock market cycles, but they don't follow a fixed timeline.
Should You Entrust All Your Money To A Single AMC?
If you are a market participant, you have probably heard the quote 'don't put all your eggs in one basket', which suggests diversification. Investors often focus on diversifying across categories like large-cap, mid-cap and small-cap, but they may unintentionally overlook diversification across different AMCs. The question arises: is AMC-wise diversification really necessary? Rakesh Deshmukh takes a closer look at this scenario
Wild Swings Engulf Global Equities
U.S. stock markets experienced significant volatility. An early-week rally pushed the markets to new highs, but this momentum faded, primarily due to weaknesses in the tech sector. The major indices had a mixed finish with, S&P 500 and Nasdaq closed lower, while the Dow recorded a notable gain.
U.S. Elections and China's Economy Hamper Commodities
Commodity markets experienced selling pressure in the last fortnight, driven by uncertainties surrounding the upcoming U.S. presidential elections, concerns about the Chinese economy, and increased agricultural production in Brazil.
Wealth Building For Retirement Through Mutual Funds
Retirement is one of the most crucial and lifechanging phases. It marks a period where maintaining your lifestyle becomes paramount even though your regular income stops.
Mastering Investment with Information Ratio
Information Ratio helps in navigating the complexities of the investment landscape by assessing an active fund manager's performance. And though it has its limitations, it remains an essential part of the finance industry. The article explains what Information Ratio is and how investors can use it as another tool
Plan To Be Financially Independent
Each of us aspires to be financially independent as it ensures having enough resources to be self-sufficient and control our finances.
❝Technology is the new game-changer"
With a new breed of young investors entering the financial markets, it is the use of technology that is increasingly playing a major role in how investments are done and tracked. Anand Radhakrishnan, Managing Director, Sundaram Mutual Fund, shares his opinion about how this factor is turning into a significant tool and how it will shape the strategies of his company
What If Donald Trumps?
The potential election of Donald Trump as president in the U.S. carries significant implications for the Indian equity market. It could lead to changes in the global trade dynamics, in particular affecting the Indian IT sector while also raising inflation levels and leading to yet another revision in the visa programme for Indians who want to work in the US. The article takes a closer look at what may lie in store
Sectoral Gains Make A Mark
Benchmark indices continued their uptrend, reaching new record highs, although the pace has slowed as the broader markets faced selling pressures
