In this article, we dive into an interesting study on Mi NNF 10 strategy and its benchmark , the Nifty Next 50 Index. Mi NNF 10 is a strategy that selects ten stocks from the Nifty Next 50 stocks. This study analyses the performance of this strategy over the last 14-15 years of data.
The study aims to assess the performance of Mi NNF 10 strategy, even if an investor enters the market at the top of the cycle. Many people fear entering the market when it has already experienced a significant run-up. The study examines the outcomes of investing in this strategy for a three-year holding period.
Entry Point: April 2011
If an investor entered the market at the top in April 2011 and held onto their investments for the next three years, they would have earned an absolute return of 20.0%. However, those who invested in the Mi NNF 10 strategy during the same period witnessed a remarkable return of 52.3%.
Entry Point: August 2015
Taking a look at another entry point, those who invested in the Nifty Next 50 Index from August 2015 and held for three years earned a return of 55.0%. However, those who opted for the Mi NNF 10 strategy during this period enjoyed even higher returns of 74.0%.
Entry Point: August 2018
Investors who entered the market at the top in August 2018 and held onto their investments for three years saw returns of 33.0% with the Nifty Next 50 Index. On the other hand, those who invested in the Mi NNF 10 strategy experienced significantly higher returns of 59.9%.
Entry Point: October 2021
As of November 2, 2021, the study includes data from the ongoing three-year period starting in October 2019. During this period, the Nifty Next 50 Index has only provided a return of 4.5%. However, the Mi NNF 10 strategy has outperformed it with an impressive return of 17.7%.
Looking at the four peak periods analysed over the past twelve years, it is evident that even the absolute return of the Nifty Next 50 Index has been decent in most cases. However, the Mi NNF 10 strategy has consistently provided outstanding results.
In the first go, the Mi NNF 10 strategy yielded a return of 52.0%, followed by 74.0% in the next go, 59.0% in the third go, and currently, 17.7% in the ongoing period. These numbers clearly demonstrate the effectiveness of holding investments for three, four, or five years, regardless of the entry point.
Of course, entering the market at more favorable times can potentially enhance your returns even further. This is why it is often recommended to stagger your investment moves and not invest a lump sum at the top of the market cycle.
This study provides valuable insights for investors who often find themselves in a dilemma about when to enter the market. The findings suggest that the timing of entry is not as critical as many may think, especially when considering a long-term investment horizon like the NNF Ten strategy.
While the study specifically focused on the Indian market using data from the Nifty Next 50 Index, the principles can be applied to other indices and markets as well. The key takeaway is that holding investments for at least three years helps overcome the impact of the entry point.
Investors should avoid getting caught up in short-term market fluctuations and focus on their long-term investment goals. Instead of trying to time the market perfectly, adopting a consistent investment strategy and following the principles of diversification can yield better results.
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