Mi 20 : Your – Must have – Affordable – Mid & Small Cap Strategy

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Mi20 is a dynamic strategy which aims to outperform the underlying benchmark MidSmallcap400 index. These are the 101st -500th stocks in the market place. This product is suitable for use in all stages of the market cycles as it is designed to remain invested in the strongest 20 stocks in the pack regardless of market conditions

Rs 100 invested into Mi 20 back in Apr 2016 would grow to become Rs 485.6 – in other words, almost 5x returns while its benchmark index (Mid-Small 400) would yield about 50% lesser at Rs 268.8.
Phenomenal outperformance right ? Before going deep into other metrics, it would be nice to share some info on Mid-Small 400 index which is actually the best performing index across those we track. Let’s take a look at some metrics to help you understand this better.

The above chart shows performance data (between 01 Apr 2016 and 01 Dec 2022) of the benchmark indices that we track here at WeekendInvesting. Mid-Small 400 has managed to generate a superb 16% CAGR while the next best performer is at sub 15%. Let us showcase a few more metrics to hammer this even better.

The above chart represents the post COVID performance of Mid-Smallcap 400 compared to India’s flagship index Nifty 50 till Nov 2022. Incredible outperformance right ?

Let us see one more data point . .

This is how Mid-Smallcap 400 compares with Nifty 50 since January 2019. While the outperformance of Mid-Smallcap 400 is still quite evident, one can notice the steeper drawdown in Mid-Smallcap 400 Index. While we already know how painful drawdowns can be, we can also see how Mid-Smallcap 400 trailed Nifty and took a long time finally emerge above the latter.

The lesson we have learnt time and again is that – Keeping drawdowns minimal can produce some unbelievable results. We explained about this in the blog below

The MAGIC of Lower Portfolio Drawdowns !

28% – 32% during mid & small caps fall that started back in Jan 2018, 50% fall during the COVID crash , 23% fall during the 2021-22 market correction. Trust me – these drawdowns might seem okay to digest on charts but EXTREMELY DIFFICULT to process in real time. It is ruthless and may completely annihilate your confidence levels and faith in the markets.

You can notice another interesting point from the chart above. Despite massive drawdowns, the index has still managed to extract a respectable or rather a very good CAGR of 16%.

What’s actually happened in case of Mid-Smallcap 400 is..

The underperformance during market falls / downtrend / drops has overshadowed the superb performance during bull markets !

Introducing Mi 20 . .

Mi 20 , like any other WeekendInvesting strategy is designed to outperform the benchmark on the upside and also on the down side.

What we mean is – When there is an up trend, Mi 20 tries to outperform it’s benchmark by riding on the strongest 20 stocks from it’s universe. And when the markets are weak, the strategy hopes to fall lesser than the benchmark using the same principal of sticking to the strongest stocks thus extracting relative outperformance at all times.

Let us dive into some performance metrics

Mi 20 (v) Mid-Small 400 

You can see the benefit of outperformance on both upside & downside from these metrics where Mi 20 clocked almost 2x the absolute returns of it’s benchmark with a delightful CAGR of 26% compared to 16.1% on the mid-small400 index.

The beauty is that the strategy has a better CAGR while managing to have lower drawdowns which in turn gives a superior RoMaD ratio of 0.7 compared to Mid-Small 400’s 0.3.

The above chart measures the CAGR at any given point in time starting from 01 Apr 2016. At the 3 year mark, Mi 20’s CAGR hovered around late 20s before falling all the way till 6% around covid fall which is still exceptionally good – we reckon. If your portfolio was still showing a CAGR of 6% at the rock bottom of the COVID fall, that is still quite good. The CAGR rose back to pre COVID levels of mid 20s and stands at a superb 26.8% as on 25 Nov 2022 compared to 16% on the Mid-Small 400 index. For latest CAGR details, please head to the WeekendInvesting HUB

What we can see from the charts is the sheer domination of Mi 20 when pit against Mid-Small 400 index. COVID fall teaches so many lessons. Have a look at the 3 year rolling returns around march 2020, Mi 20 managed to stay above zero while Mid-Small 400 cracked lower into the negative territory.

If you are new to rolling returns , you can check out a quick explainer below,

Calculating Rolling Returns

The 3 year rolling CAGR narrates the same story of outperformance . . The 3 Year CAGR by end of March 2020 stood at (-10%) for the benchmark compared to a positive % on Mi 20. As on 25 Nov 2022, the 3 year CAGR is at an astonishing (43.9%) compared to 24.2% on Mid-Small 400 index.

A monthly SIP of Rs 10,000 on Mi 20 – starting from Apr 2016 till Nov 2022 would have yielded a fantastic XIRR of 29.6% compared to 11.9% on the mid-small 400 index.

Let’s talk about some winners and losers of Mi 20

https://datawrapper.dwcdn.net/T8d0q/1/Momentum’s fundamental philosophy of riding winners far and dumping losers early is quite evident from this table

To Summarize – –

Mi 20 is your perfect – affordable – Mid & Small cap strategy to provide that much needed alpha to your portfolio.

  • Always sticks to top 20 trending stocks from it’s universe – Mid-Small 400 index
  • Outperformance against it’s benchmark
  • Superior CAGR compared to it’s benchmark.
  • Significantly Lower Drawdowns compared to Mid-Small 400 index to keep you calm during weak market conditions
  • A great alpha punching companion for your equity portfolio

    Come in with a mindset to stay for as long as possible (preferably 4+ years) and have a phenomenal journey !
    Hope to see you in WeekendInvesting Family soon.

If you have any questions, please send an email to support@weeekendinvesting.com and we’ll get back in a jiffy.

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September 21, 2023 by Weekend Investing

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    Mi 20 : Your – Must have – Affordable – Mid & Small Cap Strategy