Investment Strategy – Beat the Sensex for Big Money

Over the past few days I spent quite a bit of time understanding the dynamics of the market. All the Research Houses from Goldman Sachs to Kotak failed in seeing the SENSEX at 14,000+.

I should admit that I am investor willing to take calculated risk, want to beat the benchmark and taste Big Money, which otherwise is possible only by leveraging and trading in Derivatives and Options. This is my personal investment strategy I have opted for the next 30 months and wanted to share it with you all. Any changes in the strategy will be updated.

Before getting to the details of the strategy, I’d like to tell that I am choosing HDFC Top 200 for the purpose of investment. Why – Justified here ?

Invest Lumpsum + Average with SIP – Strategy
Now it is well known fact that we can’t time the market, especially amidst Global Economic crisis [According to me it’ll end, only when 20% of the 10 million plus displaced employees are back at their work place]. So what I have started doing is, invest in Lumpsum to such an extent, that I can average it within the time frame i.e deadline for withdrawal [30 months] / Dec-2011.

Assume, you have 50,000 to invest. Start investing in multiples of 15,000 whenever the markets are around 14,000. And over the next 30 months, keep adding Rs 1,000 in SIP. So at the end of 30 months you would have invested – 50,000 + 30,000 – Rs 80,000.

Historical returns of Top 200 in Past 30 Months:
30 Months ago, BSE Sensex was around 14,000 level [Top 200 NAV was 110] and it went up to 21,000 and then fell down to 8,500 levels and is hovering again at 14,000 levels discounting March-2011 earnings already :-).

Avg Top 200 NAV for 2007 [12 Mths] – 124.25
Avg Top 200 NAV for 2008 [12 Mths] – 128.58
Avg Top 200 NAV for 2009 [06 Mths] – 107.57 [NAV as on 1st of every month]

So you would have accumulated – 454 lumpsum units + 97 Units in 2007 by SIP + 93 Units in 2008 SIP + 65 Units in 2009 SIP. Total 710 Units

Investment of 80,000 is now worth Rs 100,820 [710 * 142 NAV of Top 200] Not Big Returns, I agree but Risk Free I have made Good Money.

Big Returns – 2009 to 2011:
In the last 30 months markets saw volatility of the decade or probably in the History of Sensex. Going forward, earnings which have hit the nadir will stabilize and will only look up. [Yes, I have studied more than 50 reports and taking my decision. Be Positive]

In Dec-2011, Analysts on the street will be discounting earnings of March-2013. Sensex EPS currently around 850 will be 870 for FY10 and should touch at least Rs 1350 for March-2013 thus taking the SENSEX to 24,000. Top 200 NAV should rise in-line [I expect it to Double]

Worst Case:
Sensex may not touch the specified targets but since we have been averaging with SIP, we won’t lose anything but have to postpone the deadline for withdrawal.

The Dont’s
Don’t go and leverage your property / assets and bring the money into the route suggested above.

Your Questions, Comments and Critics are most welcome.