Mi-NNF10 -The passive money spinning strategy6 min read

I am thrilled to announce the launch of my new smallcase – Mi_NNF10.
The smallcase Mi_NNF10 is a momentum portfolio of 10 stocks carved out of the Nifty Next 50 Index stocks . It is designed to extract alpha from within this highly liquid and coveted group of large cap stocks that make up the 51st-100th market cap positions.

This is how the CAGR outperformance stacks up over last nearly 10 years

Mi-NNF10NNF IndexNifty Index
16.6%10.5%8.10%

Nifty Next 50 Index

Nifty Next 50 universe is described by the National Stock Exchange website as “a well-diversified portfolio across sectors with top 5 sectors accounting for 76% exposure. The index in all has exposure to 14 sectors with 11 sectors having individual weight lesser than 10% each. This makes NIFTY Next 50 a well-diversified index strategy which may appeal to proponents of investment diversification”.

The Nifty Next 50 index is rebalanced by the exchange every 6 months. The current allocation of sectors and top stocks as of Oct 2020 is as follows

The performance of the Nifty Next 50 has dragged in the last few years with last 5 year returns of 6.74% vs 14.78% since inception in 1996. It is very likely that reversion to mean of returns will happen in the next few years and this index will outperform the Nifty in doing so. In the past over long term the Nifty Next 50 being more nimble than Nifty 50 stocks have outperformed in a big way ( see stats above). Yet there are shorter periods when the high concentration within Nifty ( example Reliance in 2020) have skewed the Nifty more as in the last few years. It may be time for outperformance again.

The cyclical outperformance and underperformance of Nifty Next 50 index can be seen Vs Nifty here. The chart is plotted as NNF50 divided by Nifty.

NNF10 Performance

The Strategy NNF10 is a momentum portfolio of 10 stocks from the Nifty Next 50 universe. The portfolio always has allocation to 10 stocks and never goes to cash. It also always has a 10% allocation at the start of each month to each of its constituents. The portfolio is balanced based on the closing prices on the last trading day of each month and the rebalance sent out for execution on the first day of the next month. The logic of the strategy is the classic momentum way to weed out losers and include winning stocks . You can say this is akin to the Darwin’s Theory of Evolution -Survival of the Fittest.

The strategy will require 5 min of your time on each first trading day of the month and you are all set to go. The smallcase smooth integration with top brokers ensures that this entire process is seamless and smooth. Your stocks remain in your brokerage accounts totally in your control and you retain full power to liquidate this portfolio at any point you like.

The performance of the strategy has been thoroughly tested on actual index constituents (survivorship bias free data) over the last 10 years. The data used is from March 2011 to Oct 2020 both included. This period of nearly 9.67 years have given us a CAGR of +16.69% vs +10.47% on the Nifty next 50 index. That is a HUGE outperformance !! The max drawdown too has come in at near 24% for the strategy vs 32% for the index. So on the upside the strategy beats the index, and on the downside, the strategy beats the index. Versus the Nifty, NNF10 numbers are even more stark ! Nifty has clocked a CAGR of just 8.08% and Max DD of near 29% in the same period. So the strategy is certainly outperforming all the relevant benchmarks by a wide margin!

The spread of monthly returns of NNF10 vs the Next 50 Index can visually show you the outperformance as well.

Rolling returns

The three sets used are rolling returns of 1 year, 3 years, 5 years starting 1 Apr 2011

One year Rolling returns ( Apr 2011 to Oct 2020)

NNF10NNFIndex
FY1112-4.3%-1.9%
FY121316.6%7.4%
FY131427.6%20.0%
FY141548.2%44.4%
FY1516-0.3%-3.5%
FY161751.3%33.9%
FY171815.0%13.6%
FY1819-0.6%-0.9%
FY1920-11.5%-25.3%
FY2021*26.5%29.5%

Three year Rolling returns ( Apr 2011 to Oct 2020)

NNF10NNFIndex
FY11-1442.3%26.5%
FY12-15120.3%86.1%
FY13-1688.4%67.1%
FY14-17123.4%86.5%
FY15-1873.4%46.8%
FY16-1973.0%50.8%
FY17-201.2%-15.9%
FY18-21*11.4%-4.2%

Five year Rolling returns ( Apr 2011 to Oct 2020)

NNF10NNFIndex
FY11-16110.2%76.2%
FY12-17232.3%140.5%
FY13-18227.8%154.4%
FY14-19155.5%110.0%
FY15-2052.6%8.6%
FY16-21*93.8%45.8%

Observations:

What is evident from this study is that over a 3 yr or above period the minimum returns are positive and in any 5 year period the minimum total returns on the strategy is 52.6% .

If you stayed long enough with the strategy over 5 years one would have got a minimum return of CAGR 8.82% or a max CAGR of 27.1%

One needs to let the strategy play its cycle and within a few years you will be able to find that the strategy OUTPERFORMS its benchmarks easily.

The strategy is LIVE now, open for subscription at introductory prices for a short time. Few hundred users have already registered in the last couple of days!

This is just a study to reassure oneself the efficacy of using such systems over time. Future performance is no guarantee but one can certainly say that if India markets have to perform, it will not happen without the Nifty Next 50 stocks which are the prospective candidates for inclusion in Nifty some day !

Thanks for reading. Do share your comments or critique.

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April 6, 2021 by Weekend Investing

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    Kanwaljit Singh Brar
    Kanwaljit Singh Brar
    2 years ago

    Any limit on maximum amount one invest in Mi_NNF10

    Bhavesh
    Bhavesh
    2 years ago

    It is managed by individual or by Weekend Investing??

    Pratyush Chatterjee
    Pratyush Chatterjee
    2 years ago

    Nutan Varshabhinandan Alok. This is a very good initiative, and appears (upfront) to be a better alternative to my SIP in the MidCap MF space. I plan to shift my SIP – is there a provision for SIP in this, and how would it work? Also, what would the minimum and maximum investment size you recommend in this smallcase? Thanks for thinking about the ‘common’ investors.

    Ganesh
    Ganesh
    2 years ago

    Hi I have account in zerodha , how it will work for me
    Re balancing can be done in one click or have to trade individual stocks

    MAhendra
    MAhendra
    2 years ago

    what about 5 paisa? one click?

    drvenk
    drvenk
    2 years ago

    Dear Sir

    I would like to know what is the investment required for Nifty Next 50 , and in respect of this portfolio or the consultancy Portfolio , what is the annual subscription fee , or How do you charge and what are the other charges for your services.

    i appreciate your reply

    Thanking you Best Regards,

    Dr Venkateshan Mob: +91 9845286466

    >

    Shyam Sharma
    Shyam Sharma
    2 years ago

    What are the charges for this?

    On Mon, Nov 16, 2020, 6:37 PM WeekendInvesting.com wrote:

    > WeekendInvesting.com posted: ” I am thrilled to announce the launch of my > new smallcase – Mi_NNF10.The smallcase Mi_NNF10 is a momentum portfolio of > 10 stocks carved out of the Nifty Next 50 Index stocks . It is designed to > extract alpha from within this highly liquid and coveted grou” >

    Dhruv
    Dhruv
    1 year ago
    Reply to  Shyam Sharma

    Hi, how does it work for new entrants at current market indices which are at an all time high? Would it be prudent to start this small case or wait for the markets to cool? Asking from a perspective of a one time investment and not SIP. Thank you

    chirag shah
    chirag shah
    2 years ago

    sir i have to understand in details that why this link connect to broker portal ? And how it works ?

    Xerxes Daji
    Xerxes Daji
    2 years ago

    Hi Alok, How many scrips are in this small case.  Max ? Min ? Is it possible to have the full list.

    best regards,

    Xerxes Daji

    Mob: +91-7208012655

    Kamal
    Kamal
    2 years ago

    Hi Alok,
    Do you have a comparison chart between your various small case offerings?
    Also which small case would be closest equivalent of Mi30?
    Thanks
    Kamal

    Amod
    Amod
    2 years ago

    Hi, What is the minimum investment in this Smallcase?

    Rayomand Elavia
    Rayomand Elavia
    1 year ago

    Hi Alok,
    When you suggest 2-3 lacs min investment, do you mean lumpsum at a time or could it be spread out through a year ?
    Thanks in advance.

    trackback

    […] Here was the launch piecehttps://weekendinvesting.com/2020/11/16/mi-nnf10-the-passive-money-spinning-strategy/ […]

    Mayank Patel
    Mayank Patel
    2 years ago

    Any reason to not go in cash to avoid drawdown like all other strategies? I like the idea of this fact but always being in the market seems risky to me.

    Ajaay Gutka
    Ajaay Gutka
    2 years ago

    Do I have to open a account with broker of your tie up or account with my broker will do

    Rishabh Vijay
    Rishabh Vijay
    1 year ago

    When the market is already at such a bull run and such a high. Putting money in a smallcase like MINNF-10 at this time, isn’t it risky? What are your plans to manage future corrections?

    Jitender Kumar
    Jitender Kumar
    1 year ago

    Hi Alok,

    I have the same question as Rishabh asked, in previous post. Can start this small case with 20 or i need to invest minimum amount in first time.

    You already understood , i am new on small case.

    Regards,
    Jitender Kumar

    vivekpareekblog
    1 year ago

    Hi Alok Sir,

    I had a few doubts as I am a new investor.

    1. The recommended portfolio size of this smallcase is 3-15L and the minimum investment per SIP order would be around ~50k, If I follow the SIP method (as recommended) I will reach the max recommended PF size in ~2.5years. What if the bull run continues until then and then market correction happens, can/should I continue my SIP to the smallcase beyond the max PF recommended limit? If I plan on staying invested for 5-7 years atleast.

    2. Could you provide a data charts of returns post costs (subscription fee + regulatory commissions etc for every rebalance)

    Vipul Paliwal
    Vipul Paliwal
    1 year ago

    Dear Alok ji,
    How much is minimum SIP amount for Mi-NNF10

    Sheetal
    Sheetal
    1 year ago

    Sir
    I have been investing in Mi-NNF10 small case regularly since Aug-21. My overall profit is 4%. Should I wait and continue to invest or switch to another smallcase.

    G-Gupta
    G-Gupta
    11 months ago
    Reply to  Sheetal

    Hi Sheetal

    I am planning to start investing in Mi-NNF10 with some lumpsum and then have an SIP regularly to reach 5lac to 7 lac in this portfolio. What do you mean by overall profit of 4%. What I understand is that this smallcase gives best when invested for 3 to 5 year period and we can expect returns/CAGR in the range of 20%. Is that right?

    Did you mean that when you started investing in Aug 21 and until your comment date, you only made CAGR of 4% based on amount and time you entered in this smallcase?

    Dip
    Dip
    9 months ago

    Hi,
    I am already investing in this strategy. My question is once the subscription ends , I won’t get the smallcase update. In this case what should be done? Shall we sell the stocks or keep it there for long term?

    Govill Gupta
    Govill Gupta
    8 months ago

    Hi Alok

    I have done two full SIPs on minnf10. My initial plan is to come full every month for at least 1 year to make a sizeable investment in minnf10 and then maybe keep adding more, have a 5-year long term horizon with this investment. During these turbulent times, the heart says wait and do not invest. My mind says this is also a suitable time to go IN with SIPs and keep investments running. Please guide a little here.

    And many thanks for giving us education on investments with your regular videos. The trust level is remarkably high on you with your day-to-day actions, and I understand that markets cannot be predicted