A Portfolio build on Price

In 2017, I was testing various ideas. Most did not have much value but some did and went into production mode. While I have been invested in Momentum since 2017, another portfolio that I invested family money into was a Buy and Forget Portfolio that did not have anything to do with the one key criteria for Buy and Hold – fundamentals.

Instead, the portfolio was created based purely on the stock price. To qualify for the portfolio, all that the stock had to do was be one of the most expensive ones among the listed stocks in the National Stock Exchange.

There is no rhyme or reason for such a portfolio to work. Stock prices don’t reflect anything other than how much one is willing to pay for a single equity share. A stock that trades at 100 may be expensive vs a stock that trades at 10,000.

Mining stock data for patterns is one of the easiest ways to find strategies that worked in the past. Unfortunately most of them have no rationale other than the fact that somehow in the past a lot of things lined up correctly and hence this strategy was seen as one among the best.

A strategy that is curve fitted will start wobbling the moment the rubber hits the road and more or less likely to fail within the next few months. Yet, mining is a great way to figure out what works and what doesn’t. 

So, how does one come to a conclusion as to whether a strategy really has value or not. This from my own understanding and experience comes down to testing it in the real world. While you can always test the strategy in different markets or use a different set of data to test (this test is called Walk Forward Testing), the best test is unfortunately the real market and even here judgments can be passed after a minimum period of 3 years.

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We now have 3 Portfolios. Pricing is NOT per Portfolio. One Price – multiple Portfolios. 2021 should see at least one more if not two more offerings. Our objective is to provide portfolios that have low correlation between themselves (only exception is the Large Cap Momentum Portfolio which has a high correlation and overlap at times with the Multi Cap Momentum Portfolio).

Do check out our Philosophy, Process and Fees here