Yadnya’s Model Portfolios Performance - Gearing up for the Marathon named Long-term Investing

Many of our friends who are marathon runners say that ‘Marathon is an event where everyone is equal and ordinary at the starting line, but a legend is born at the finish line’. Isn’t that so true when it comes to our investing lives as well? The baby steps of investing every month’s savings and watching ourselves move closer to the finish line of achieving our financial goals require similar traits of a marathon runner. Focus on specific aims and goals, resilience to overcome hurdles of unprecedented emergencies, and market downfalls as well as the preparedness and motivation to stay on track no matter if the portfolio bleeds red due to unfortunate events like Covid, Russia-Ukraine War, inflation-led recession, and what not!

It has been more than 3 years since the launch of our risk profile-based model portfolios and what an enriching journey it has been. With our model portfolios, we aim and try to help investors run this marathon of long-term investing enabling them to achieve their financial goals through disciplined investing backed by deep research. Here is a glimpse of the performance of our model portfolios since the inception of the portfolios as well as during the last 1 year.

(**The Quanto-Funda model portfolio strategy was changed in December 2022. In the earlier methodology, we calculated sector-wise scores and picked the top performers in a respective sector based on the performance of stocks on various fundamental and quantitative parameters. In the new methodology, we are moving to a more momentum-oriented strategy.)

In the last year, most of our portfolios have outperformed Nifty50 TRI returns with the maximum performance shown by the Student and Early Earner portfolio with an annual return of 50.88%, followed by the Quanto-Funda Portfolio and the SIP Portfolio with annual returns of 50.09% and 47.59% respectively. NIFTY50 TRI has given a return of 27.25% in the last year i.e., from 1st July 2023 to 02nd July 2024. As per expectation, the Quanto-Funda model portfolio has given the highest returns as it is a high-risk portfolio meant for seasoned active investors with a high-risk appetite.

As the name suggests, the Value portfolio follows the principles of value investing where we look for companies with strong business models that are available at very attractive valuations compared to their peers from the same industry. If we look at the since inception returns, the Value Portfolio has shown stellar performance with 37.13% CAGR since its inception in September 2020 and has proved that the methodology chosen for this portfolio is on track.

The EV and Green Energy portfolio and Value portfolio have generated more than 40% returns in the last year. Our MF Only portfolios viz. the Wealth Creation portfolio and the All Seasons ETF portfolio along with the Moderate portfolio have also generated more than 30% returns in the last year.

Performance of Risk Profile-based model portfolios: True to their name these are core model portfolios suited for different risk profiles including the presence of different asset classes, including equity, debt, and money market. All three core portfolios have generated alpha as compared to the broader market benchmark. An important thing to notice here is that NIFTY 50 is a 100% equity benchmark but the Moderate portfolio includes 90% Equity and a 10% debt component. Similarly, the Conservative portfolio has only a 75% Equity Component. Moreover, all three of our core portfolios have significantly lower beta as compared to the benchmark index. It means that if the index falls by 10%, the growth portfolio, with a Beta of 0.62, falls by a lesser extent of 6.2%. Incorporating risk parameters like Beta and standard deviation helps us build portfolios that are more resilient than the market in case of downfalls because we know that losing money is more painful than the delight obtained in gaining profits. These portfolios were started in December 2019, and they have already seen some extreme events of the COVID-19 Pandemic and recessions, the global rise of inflation-led interest rates, and Russia Ukraine war. Thanks to our philosophy of “always keeping risk in mind” while constructing these “Core Portfolios”, they have performed true to our expectations. The annual returns of the three core portfolios viz. Growth, Moderate and Conservative are 30.10%, 25.59%, and 28.55%.

Performance of our quant-based portfolio: The Quanto-Funda model portfolio strategy was changed in December 2022, when we moved to a more momentum-oriented strategy. The portfolio has generated 50.09% returns in the last year.

Performance of the Fund of Fund Model Portfolios:  The wealth creation portfolio has an annual return of 37.70%. The since inception CAGR return of 28.16% is marginally higher than the NIFTY 50 TRI return of 26.78% but the wealth creation model portfolio is 90% into equity with a very low Beta of 0.45. As they say, “The essence of investment management is the management of risks, not the management of returns”.

The All Seasons ETF model portfolio has generated 34.46% returns in the last year while the since-inception returns also show a good performance of 23.99% CAGR.

The regular income model portfolio owing to its characteristic of regular income has shown a good performance of 17.06% CAGR since its inception.

Performance of our newest portfolio: We launched the Happy Earth Portfolio on September 20th, 2023. Since its inception, the Happy Earth portfolio has generated a 35.60% return, while on the other hand, the NIFTY50 TRI has given a return of 22.31% during the same period.

For the whole team of Yadnya, it is very satisfying to see that the investment objectives and goals for which the respective model portfolios have been created are being met following a strict regimen of the risk management framework. Legendary investor Charlie Munger famously said that risk to him isn’t just stock volatility, risk to him is the risk of permanent loss of capital as well as the risk of inadequate returns. Taking bigger risks for big gains seems fancy but the fanfare stops when big risks lead to big losses. For us, managing the downside risk i.e., prioritizing risk over reward but with a focus on the upside is going to remain our mantra!