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Our longest running strategy at Capitalmind has been our Long Term Portfolio. While it started in a small way with just 4 stocks in November 2014, we have added more stocks over time. The basic philosophy of the portfolio is to generate long term returns by holding a set of stocks that have potential to grow at a rate greater than the market.

Unlike our Momentum Portfolio where there is a change once a month, the number of changes in our Long Term Portfolio is somewhat limited in nature. Over time we have entered into Long position in 46 stocks while also exiting 18 stocks.

Here is the performance of the portfolio plotted using Net Asset Value method.

The portfolio has grown about 60.5% in about 32 months. The compounded growth rate, from inception, is about 18.66% per year, but the CAGR is perhaps not the best way to measure performance as cash flows have been different. The Nifty’s return, in the same time, on a CAGR basis, is just 8%, which the Nifty Next 50, a better Index for comparison, is at 16.53%.

The portfolio reached its current size (Number of Stocks) in December 2016. Since our aim is to create a portfolio of 30 stocks, this gives us a opportunity to add 5 more stocks which may come into our long term radar.

Turnover ratio currently stands at 18% for the last year. A low turnover figure indicates a buy-and-hold strategy.

The Return You Made: We Accomodate Cash Flows

To understand why Compounded Growth Rates may not be the same for you, please read our article on this topic.

Since the strategy had multiple cash flows, the best way to determine returns would be through XIRR (or simply the Internal Rate of Return). Since the start of the Portfolio in November 2014, this portfolio has given a XIRR return of 27.58%

The year 2015 was lousy, and we really didn’t do that much. But since 2016, returns have been excellent, with just four losing months in 2016 and three in 2017 so far.

Based on similar cash flows, the Benchmark (Nifty Next 50) XIRR return would be 20.98%. In other words, this portfolio, at 27.58%, has beaten the best Index out there and one that no major fund benchmarks.

(Note: we don’t consider dividends in the Long Term Portfolio return calculations, so we can compare it with the return of the Nifty Junior)

While returns are important, it’s also important to take a look at the risk. High volatility in portfolio can be measured by looking at draw-downs of the equity curve. A portfolio comprising high risk stocks such as say Small Cap stocks would have a higher volatility / draw-down than one composed of large cap stocks.

The Drawdown or “Bleed”

Our worst draw-down came at the same juncture as the rest of the market though with Beta of the portfolio being higher, we saw a much higher draw-down compared to benchmark indices. We saw a bleed of about 25% on the portfolio

On an overall level, the portfolio has done better than the alternatives we could have invested into. With more structure being provided in portfolio creation, we will try and beat them going forward as well.

An SIP Instead

We have made some recent changes and will continue to add or change the stocks going forward. We haven’t considered the basic mechanism we would use to buy into this strategy, though: an SIP.

If you had invested the same amount every month, the return since inception is about 30% (annualized). A similar amount in the Nifty Next 50 would have returned 25.36% (annualized).

Return Matrix For Comparison

To get a single point understanding of our returns over the last few years, here’s the long term performance table:

Our Premium Long Term Portfolio is at

Our Premium Momentum Portfolio 2.1 is at

Our Premium DivYield Portfolio is at

Note: This is not portfolio advice. Consider this a very risky portfolio and proceed at your own risk. At Capitalmind Premium the reason we have a portfolio is to demonstrate our commitment to our analysis, and we track it closely. It is not meant to be a recommendation for anyone in particular, primarily because we don’t know your risk profile.

Holdings: Analyst and family do own some of the positions listed above. Please assume we are biased

Now, tell them about it: