How It Works
This strategy picks just 30 stocks from the entire Nifty 750 universe. Till this point it remains very similar to the Maverick Momentum strategy. But here’s the key difference – this one comes with a buffered approach.
I’ve got trend-following filter built in that move us to partial or full cash as soon as the market starts dipping. Think of it as having a safety net that kicks in when things get ugly.
Buffered magic – Trend filter
In his book Stocks on the Move: Beating the Market with Hedge Fund Momentum Strategy, Andreas F. Clenow presents the idea of having a trend filter, a moving average of sorts on the index, stocks are added only when the index is above the said moving average.
I follow a similar approach here. For instance during the market crash during Jan and Feb 2025 the strategy was in cash.
But frankly speaking this still has its volatility since it includes small-cap and micro-cap stocks. You’re going to see some swings at least, but may be not as crazy as pure momentum strategies.
The buffered approach means we get out early when markets turn bad. But sometimes this same filter gives us whipsaws – getting us out too early and back in too late when markets are choppy. There is no easy way when it comes to momentum.
But here’s why it’s worth considering: the returns have been pretty solid over the long run, and the downside protection is better than most momentum strategies.
During the 2008 crisis, this strategy dropped 25-35%. That means if you had 100 rupees, it would have become 65-75 rupees at the worst point. Still tough, but way better than the 45-50% drops you’d see in pure momentum strategies.
Even in normal times post-2008, we’ve seen drops of 20-28%. So you need to be okay with seeing your money decrease by a quarter sometimes, but again, it’s more manageable than other aggressive strategies.
Who Should Consider This?
If you’re the type who checks your portfolio every day and panics when you see red, this isn’t for you. But if you want decent returns with some built-in protection and can handle medium volatility, this could work for you.
Conclusion
Like with any investing approach this strategy is effective only if you can stick with it for at least five years. The returns speak for themselves, and the buffered approach gives you some peace of mind during market crashes.
The weekly rebalancing keeps things fresh and ensures we’re always holding the stocks with the best momentum. Truth be told, the trend-following filter isn’t perfect – it’ll sometimes get you out too early or back in too late – but over the long run, it helps protect your downside while still capturing most of the upside.
How to invest?
Click on “View smallcase” button and follow through.
Investments in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BSE and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.
Reach out to us at info@sandeeprao.co for any clarifications.
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