Do you know how well your portfolio has performed ?

June 11, 2024 3 min read

Impressive Performance of Nifty Junior

The past twelve months have seen some remarkable surprises in the markets. The Nifty Junior, represented by the aqua line, has done exceptionally well, showing a growth of 69.2%. This index, which is large-cap oriented, has outperformed other major indices, including Nifty, Bank Nifty, mid caps, and small caps. Nifty itself has grown by 25%, while Bank Nifty has increased by 10.5%. Mid caps and small caps have shown even more impressive growth, at 61% and 64% respectively. But the standout performer has undoubtedly been Nifty Junior, showcasing its strength in the market.

As on 23 May 2024

Evaluating Investment Strategies

It’s crucial to periodically compare your investment strategy’s performance against the market. Doing this once a year or once every couple of years can help you understand how well your strategy is working. If your strategy consistently underperforms the benchmark, it might be time to reconsider your approach. This is especially true for those who engage in discretionary investing, as they often juggle various activities like intraday trading and shorting without keeping a clear track of their overall performance.

The Importance of Tracking Performance

For instance, if you start with a capital of ten crores and end the year with a gain of two crores, it might seem like a good outcome. However, if the market itself has provided returns between 24% to 60%, your performance might not be as impressive as it initially seemed. Burning the midnight oil on complex strategies only to underperform the market can be frustrating and counterproductive. It’s essential to regularly compare your returns with market benchmarks to ensure you are on the right track.

Market Segments and Allocations

As on 23 May 2024

Since the inflection point in November, different segments of the market have performed variably. Bank Nifty has increased by 12%, Nifty by 18%, and mid cap and small cap indices by around 32% to 35%. During the same period, Nifty Junior has surged by 57%. Observing these trends highlights the importance of having diversified allocations across various market segments. Sticking to just small caps or large caps can limit your growth potential. Instead, spreading your investments across different segments can help balance your portfolio and capture opportunities across the market.

Importance of Regular Evaluation

Many investors don’t regularly evaluate their investments. They might feel content seeing ads or hearing positive news about mutual funds or real estate investments. However, it’s vital to understand the actual performance metrics like IRR (Internal Rate of Return), CAGR (Compound Annual Growth Rate), and XIRR (Extended Internal Rate of Return). For example, simply knowing a real estate investment has grown from one crore to five crores doesn’t provide the complete picture. Understanding the rate of return over time is crucial to making informed investment decisions.

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    Do you know how well your portfolio has performed ?