No . There is no such dividend of any units.
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Thanks for confirming. I have to take to zerodha coin to understand what it is then.
@ChaitanyaC , @Sudhakar_Subramanian ,
Many times we can learn from the mistakes of others too. Just saw a video of Invetsing Fool , who follows the same rank based strategy and he recently re-balanced on 15th sept, one stock which was sold from his portfolio in this rebalancing was BEL, which he purchased on 15th May and on 15th sept when he sold, he had zero returns, but that stock was at 54% up in july somewhere, but he lost all his gains, by the time the stock went down in ranking and left the portfolio. So my view is , if he had put , lets say 15% as a trailing stop loss, he would have salvaged atleast 30-35% gains, instead of losing all the gains.
I have given a thought whether to apply quantified trailing stop loss of 15% exact or it to be based on Moving averages , so to get some trending benefits. Will write about it in some while.
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Well, being a Momentum proponent myself and having manually backtested a strategy from 2018 (until I went live with it this Jan), I can tell you that there’s nothing right or wrong about either of the two approaches. Over a long period of time, you will see that you will have a decent share of such regret scenarios either ways. One might regret exiting at 15% trailing loss or one might regret not having exited. Doesn’t matter over the long term in my opinion. One should choose as per one’s psychological framework. The trailing loss approach will ofcourse result in higher churn which may not appeal to everyone.
This is also proven by the fact that the momentum indices published by NSE Indices have comfortably outperformed the broad based indexes and a lot of active funds as well ( in the respective category) by a decent margin even with a rebalance period of 6 months.
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@sandeep17 Thank you for your reply.
I was also wondering why mutual funds keep the rebalancing period of 6 months. In this momentum strategy keeping such a long rebalance period is not good as it will start facing momentum decay. To corroborate the evidence, i simply checked the current portfolio of UTI nifty 200 momentum 30 fund and Tata Midcap150 momentum 50 fund.
I checked charts of all these 80 companies, and what I found is, almost 80% companies are either consolidating or they are even in downward slope. Inspite of this, these funds have given more than 60% and 50% returns in last 1 year. So my contention is that, if we apply smaller rebalancing period, we can definitely outsmart these guys.
Also these mutual funds are following that particular indexes, so they have to do 6 monthly rebalancing as the underlying index does that. And being a larger size funds, it is difficult for them to entwr and exit the stocks without impact costs, like we do. May be thats the reason. But certainly its along period for the strategy. Also now Motilal has come out with NFO for Nifty 500 momentum fund, even in that they are having same 6 month rebalancing. And in 6 months, entire momentum world chnages a lot.
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Sure one can but smaller rebalance period and higher churn comes with its own cost. Most of the Momentum indexes from NSE have given a 20%+ return in the last 19 years ( inception year is 2005 )…now if one thinks one can outperform that weekly churn, its possible but not easy. As I said, nothing right or wrong. Keep in mind that the 20% return on the index is with 0 effort and no taxation overheads. Doing it actively ourselves have these costs.
Now even I have chosen to do it myself but I have opted for a low churn strategy so I dont have a trailing loss approach at all. My momentum strategy has had only 1 exit in the last 8 months and despite that am quite satisfied with the returns. Churning 1-2 stocks every other week not exactly my cup of tea even if I am convinced I am leaving some return on the table. Ultimately cost of execution and overheads matter in the long term.
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I agree with you that momentum funds are the best instruments to follow this strategy. They are trust entities so very tax efficient. The only problem is they are having very long re-balancing period. If they would have been following atleast 1 month as rebalancing period, I would have stopped doing this DIY. Most research papers show that momentum in stocks , in general sustains over 6 months to 1 year. Hence as opposed to buy and hold strategy where holding long-term is a virtue, in this strategy, holding long term becomes a disadvantage. Are you not worried about momentum decay and getting entangled with stocks with losing momentum, if you hold longer? After all its all going to be short term capital gains only, then why wait for 6 months? Also In Stocks on the Move, by Andreas Clenow, even being a hedge fund, they followed weekly rebalancing so that they are always with high momentum stocks instead of stale momentum…What u say about that?
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Can u please share any link for “Momentum indexes from NSE have given a 20%+ return in the last 19 years”, not able to find any. Thanks
@troll Its actually backtest done by NSE from 2005
Thanks for sharing this. It is suprising that such a simple and suboptimal index can give such returns. Not sure if backtesting has to do something with so high returns
Hi Mudit, would really appreciate if you could share your tactics for position sizing in your momentum portfolio.
There are no tactics. All are equal weighted. Since 20 stocks in total, each one is 5% to start with. After that, I let the winners grow to whatever size they go, till they are in ranking list. Currently the highest weight is 7.5%
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started reading this book recently…but not that great. Many things are repetitive and Charts patterns are unnecessarily too much elaborative. I bought this book thinking that its for indian stocks and indian market, as most books are of US markets. But its still time for Indian authors to write good books like Mark Minervini, or Stan Weinstein…
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What is ranking list? How do you arrive at that?
I been following this thread from last 3-4 months, thanks for all the knowledge Mudit.
I have taken subscription of momoindiascreener.com
If you know python, you can urself write the code for getting average price momemtum of last 6 months , 12 months and rank the stocks accordingly.
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Do you know of a github code repo written in python to calculate momentum?
@Mudit.Kushalvardhan can you please explain how are you calculating momentum for last 6 months or 12 months? Apologies for this very basic question.
I m not calculating it myself. I have taken a subscription of a website for that.
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There is YouTube channel called Momentum Lab and they have a Python script to filter momentum stocks. I use both momoindiascreener and the Python script to filter out the stocks. Momoindia screener is easy to use in my opinion.
Watch this video to understand the Python script - https://www.youtube.com/watch?v=9iu6q63Ji2o
Use this link to request access for the Python script, then the Momentum Lab will give access to the code.
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Are you using Viraj’s momentum screen as it is or do you add more parameters?