Hi
I had done a personal paper trading experiment since a month ago, and would like to share its results with you. These can be found on my posts on resp. dates.
A. 4 weeks ago, when the rally was just starting, we bought Tata Motors. Its up since then 22.18%. Benchmark Sensex is up 11.08%.(If you recall, we had given a call 'Sell your shorts and go long at this time).
B. 3 weeks ago we further put together a bunch of stocks for observation (not all of investment quality), but still for observation's sake. This group of 7, is up 4.67%, with 1stock negative 4.97%. One standout winner being Havell's India with a 15.34% gain.
Sensex in this period gained 8.98%.
C. Then again, 2 weeks ago, we put together another list. This time of 22 stocks, and also gave a positive call on cement and pharma. The cement call played out extremely well in the next two weeks, whilst we're hopeful that the pharma will join in soon, when the mkt takes a breather.
These 22 stocks gained as a group 5.59% in two weeks. There being many standout performances of above 9-10% and one stock 17.18% & one 20.54%.
Sensex in this period gained 5.17%. So on this list which had better picks than list 2, we were able to do slightly better than the sensex.
In this list there were 3 negatives, minus 0.87%, minus 1.08%, and minus 3.68%.
So the drawdowns were not too large.
======================================================
How to make sense of all this ?
1. We note that we had not prescribed any buy position, pretty much during the entire last year when the market was bearish.
2. We caught the market turn properly, and on all the three lists/ picks, we are in the positive.
3. 1 out of 7, or 3 out of 22 stocks did go negative, but acc. to us they can always be avoided. More of an observation list, rather than an actual purchase list.
Further the negatives illustrate the safety in numbers game. 3 are down but 19 are up, and the net result is up.
4. There is one more thing, you might argue, why do all this and not just purchase the Index future or something. It is not a bad practice when the move direction is clear. (which normally is not so easy).
However, we believe we or anybody for that matter can outrun the Index over a longer period of time. The longer the period, the more a small group/sector or individual stock will yield. Hence we would always prefer to create a portfolio rather than just buy the Index.
In other words, these results above do not reflect/ lay to rest, the Index vs Portfolio argument.
5. These findings and other stuff, encourage us to the conclusion that we should attempt this game with leverage. Since a positive result is fairly possible, leveraging it is not a bad idea.
The Indian market doesn't offer too many stocks for leverage purposes - a few it does, but the developed world does, and this game suits it nicely.
Best regards
Akal
