We wanted to 8x our money in 10 years with the highest probability.
We had 3 ways to get there
- Mutual Funds
- PMS (Portfolio Management Services)
- Index
Let's start with Mutual Funds & PMS.
At their peak, there were more than 2400 Mutual fund schemes and 442 PMS schemes in India. So we had more than 2800 schemes to choose from.
It was like picking the right stock, with no guarantee that we had picked the right one.
All the reasons why we decided not to invest in Mutual funds and Active PMS.
1. We couldn’t just pick one based on past performance because,
- The fund manager for mutual funds and PMS has changed over the years. A lot of intelligence & intuition is involved while picking the stock. It is a subjective process so it’s difficult to be taught or passed on to the next fund manager.
- The Fund manager always needs to be in the right state of mind while managing our money. If the manager is having a bad day (Which everyone does from time to time) and he lets his emotions or any other personal bias come in the way of picking the right stock or not selling the bad one, it will significantly affect your performance.
2. There is a 37% chance that the scheme you pick might not even be there after 10 years.
Out of 2400, only 1500 survived - 900 closed. How do we know if the one we pick will even exist after 10 years?
Source SEBI
3. 63% of the Mutual funds & 60% of PMS did not even outperform the Index in the last 3 years
Source: 63% of Equity Mutual Funds Underperform Benchmarks Over 3 Years: Economic Times Analysis
We have a higher chance of outperforming most of the mutual funds and PMS if choose to invest in the index fund.
Even though there might be a few schemes that are outperforming the index, the probability of them continuing to that for the next 10 years is not highly certain.
The ones that could outperform we have no guaranteed way of knowing which to pick.
The first 2 options have more than a 20% chance of getting us to 80CR. We did not like these odds.
We would have to wait for 10 years to see if we had made the right choice.
Now we’re left with the 3rd and final option - The Index - A Quant model.
Quant Investing picks stocks based on strict rules and algorithms instead of the subjective decisions of the fund manager.
Warren Buffet - The Best Active investor in the world is telling everyone to put money in Quant strategy. (S&P500)
Warren Buffet even bet on this and won - : Hedge Funds vs. S&P 500 – And the Winning Outcome
In the US 85% of fund managers failed to outperform the S&P 500
So we thought if the Index formula outperforms most of the Mutual funds though why not make it better?
So we added rules and algorithms of our own and created a better formula.
Risk-adjusted - (Active Investors can’t predict how much their scheme could fall if the market crashes) Since we backtest we know, so we’re prepared to take advantage of this.
We have been in the top percentile consistently. We stand 4th among the best PMS in the country. (Ranked based10-years returns)
| Scheme | 3 years CAGR | 5 Years CAGR | 10 Years CAGR | |
|---|---|---|---|---|
| 1 | Aequitas Investment - India opportunity product | 37.1% | 40.6% | 29.6% |
| 2 | Globe Capital Market - Value | 31% | 33.6% | 29.6% |
| 3 | Master Portfolio services - Growth strategy | 21.1% | 32.6% | 26.6% |
| 4 | Qode Advisors - Qode Growth Fund | 24.9% | 35.1% | 23.4% |
| 5 | Nine Rivers Capital holdings | 22.3% | 34.9% | 23% |
| 7 | Girik Wealth Advisor - Multicap Growth Equity strategy | 22.9% | 28.8% | 22.9% |
| 6 | Valuequest Investment Advisors - Platinum | 27.3% | 38.7% | 22.6% |
| 8 | Accuracap - Picopower | 22.0% | 36.7% | 22.4% |
| 9 | Centrum PMS - Multibagger | 17.2% | 30.8% | 21% |
| 10 | Abans Investment managers - Growth & Momentum | 20.2% | 28% | 20.9% |
The probability of outperforming the index depending the no. of years you longer you stay invested higher the probability of you beating the index.
| Over 1 year | 62% |
|---|---|
| Over 3 years | 62% |
| Over 5 Years | 64% |
| Over 7 years | 80% |
Our process helps us win year on year.
Our rules & algorithms help us find winner stocks consistently year after year - we don’t depend on 1 or 2 lucky winners (stock). Since we don’t need to depend on one fund manager’s intelligence, insights, or intuition. We’ll continue to make money even without a fund manager.
Our Winners over the years
| Name of company | Returns | Holding period |
|---|---|---|
| Tata Elxsi Limited | 1264% | 7 Years |
| Page Industries Limited | 587% | 5 Years |
| Sonata Software Limited | 474% | 5 Years |
| Avanti Feeds Ltd | 458% | 6 Years |
| Alkyl Amines Chemicals Ltd | 379% | 1 Year |
| Alembic Pharmaceuticals Ltd | 363% | 3 Years |
| Ajanta Pharma Ltd | 313% | 5 Years |
| Britannia Industries Ltd | 296% | 2 Years |
| Deepak Nitrite Ltd | 292% | 1 Year |
| Amara Raja Batteries Ltd | 235% | 3 Years |
Our Performance
Our 10-year CAGR - 23.1%. Our Absolute return for the same duration - 702.4%
If you invested 10CR 10 years ago, you would have 79CR today.
The best time to plant a tree was 10 years ago, The second best time is today!
How much do you want to invest?
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