At Weekend Investing, we have been running a US based model portfolio in the background for a significant period of time. Although we have not released it as a strategy or a product in the market, we believe it is essential to understand the basic idea behind a US based investment strategy.
Why US Equities ?
One of the primary factors that make a US based strategy appealing is the depreciation of the Indian currency against the US dollar. Over the last 50 years or more, the Indian rupee has consistently depreciated against the dollar at an average rate of 3-5% per year. This depreciation affects the dollar returns of our Indian investments when compared to potential returns from overseas investments.
Let’s take a closer look at the performance of the S&P 100 index, which represents the top hundred stocks in the US market, often considered the bluest of blue chips. Over the past twelve years, the S&P 100 index has increased by a remarkable 280%, whereas the Nifty adjusted for USDINR has grown by only 72%. This substantial difference highlights the potential for higher returns in the US market, even when considering the fluctuations in the exchange rate.
Diversification is crucial, not only within equity but also across different asset classes. By allocating a portion of your investments to a US based strategy, you can hedge against currency fluctuations and tap into the benefits of a stable and well-performing market. It is important to note that a US based strategy offers advantages such as no transaction tax and lower brokerage fees, which can further enhance your returns.
Introducing the US Top 10 Portfolio
At Weekend Investing, we have been running a rotational style strategy based on the S&P 100 index for educational purposes. This strategy focuses on selecting and tracking ten stocks at any given time. Monthly reviews and rebalancing ensure that the portfolio remains optimized and aligned with market conditions.
Our rigorous studies based on accurate and reliable data sources reveal that the US top ten strategy has achieved a compound annual growth rate (CAGR) of approximately 13% over the past 20 years, outperforming the US S&P 100 index returns of 7.7%. While 7.7% may not seem significantly higher, when considering compounding over several years, the strategy can deliver meaningful returns, particularly when coupled with the potential appreciation in the exchange rate.
Examining the performance of our strategy, we notice a correlation with the underlying S&P 100 index. As expected, periods of strong upside in the index are replicated in the strategy, as are the downside movements. However, the overall aim is for the upsides to outpace the downsides over time. The important rule of letting winners run and cutting losses short remains essential in this strategy.
Analyzing the rolling CAGR over the entire period, the US top ten strategy stabilizes at an impressive 13% in dollar terms, compared to the 7.7% achieved by the US top ten index. This difference translates to an additional alpha of 4% per year, highlighting the potential for higher returns by diversifying into the US market.
Taking a broader perspective and comparing the performance with the Nifty, we observe that the S&P 100 index has consistently outperformed the Nifty over the past 10-12 years. Furthermore, the US top ten strategy has surpassed the S&P 100 index’s performance by a significant margin. With an annual growth of 5%, the strategy’s outperformance can become even more significant over the next decade.
Understanding the potential benefits offered by a US based investment strategy, we have decided to provide access to this strategy as an educational tool for our Weekend Investing subscribers through the Weekend Investing app. Whether you are a small-case investor with Weekend Investing, a universal investor, or a stairs investor, the strategy will be open to all. Simply download the Weekend Investing app, and within 24 hours, your existing subscription will be registered, granting you premium access to this US based strategy.
In conclusion, a US based investment strategy presents an attractive opportunity for investors looking to diversify their portfolios and maximise returns. With the strong performance of the S&P 100 index and the potential benefits offered by the depreciation of the rupee against the dollar, investing in the US market can significantly enhance your investment gains. We encourage you to take advantage of our educational US based strategy and explore the potential offered by this exciting market.
Feel free to share any questions or comments you may have regarding this US based investment strategy to support@weekendinvesting.com .
Who can access the US Top 10 Portfolio ?
All current users of WeekendInvesting products across Smallcases, Universal & STAIRS will have access to this portfolio via google sheet. Here’s a primer on how to use the google sheet for your understanding
Disclaimer : The is purely for educational purposes only.
