After a year, Monkey portfolios lose out to Nifty, Sensex
Our two Monkey Portfolios failed to live up to their early promise. They ended up at the bottom of the pile as their luck ran out early. Here's why.
By Indira Vergis & Sanjit Oberai
The experiment has ended, ladies and gentlemen.
A little over a year ago (19 August, 2011, to be precise), Firstpost decided to find out the secret to success in the stock markets (Read more about that here). We wanted to find out whether it was sheer luck or skill that could steer you to success in stocks.
Well, the results are finally in: clearly, you need skills and luck to make money in the stock markets. Luck helps you along, but doesn't quite take you all the way to victory.
Predictable, isn't it? But it's true.
At the end of one year (18 August, 2012), it was the benchmark indices that blazed past the rest of the competition. The Nifty soared 10.7 percent, while the BSE Sensex added on 9.6 percent. Just goes to show that it pays to stick to the tried and tested (index stocks are
well-researched and there are good reasons why they are included in an index in the first place) in equities. Underlining that sentiment was the brokers' portfolio, which also advanced 7.9 percent over 12 months. The brokers' portfolio contains 10 stocks picked by 10 brokerages.
Put another way, even the experts couldn't beat the indices.
Our Monkey portfolios, which achieved celebrity status in the initial weeks, didn't make money like celebrities. Monkey portfolio 1, consisting of 10 randomly picked stocks, managed to advance 6.8 percent, but in a market in which the benchmark indices scored more than 9 percent each, it was by no means a trend-setting performance.
Meanwhile, Monkey portfolio 2, comprising 10 randomly-picked stocks from the BSE 500, achieved more notoriety than celebrity fame. Like the gangster rapper who achieves instant fame and then commits suicide because he can't quite handle the success as his portfolio tanked by 8.37 percent. Monkey portfolio 2 also couldn't quite hold on to the phenomenal success it achieved in the early days of our experiment. After a while, there was only one direction for the simian: down.
We at Firstpost had been rooting for the Monkeys to surge ahead. And they did - in the first few months after we launched our skill versus luck experiment. Had the simians maintained that initial trend, they would, no doubt, have prompted the rewriting of a few textbooks on stock investing. But as the past year shows, luck and random investing can only take you so far in the markets.
Of course, it was also a rather tumultuous year for stocks: corporate earnings growth slowed and the Indian economy went from bad to worse. In such an environment, it's not easy to make extraordinary profits, but you could limit your losses by picking well-researched stocks (you could limit your losses even further by sticking to index stocks!).
What are our Monkeys going to do now? Clearly, stock market investing is not their forte. Well, Firstpost has exciting news to share: Monkey 2, it seems, is in talks with a Hollywood producer (whom we shall not name) to act in a possible remake of King Kong. All those hours of boxing workouts trying to work off the frustration of losing in stocks has apparently given Monkey a chiselled frame, which has vastly impressed the renowned movie bigwig.
As for Monkey 1, he's going back to his first love - practicing yoga and meditation full-time. The calmer of the two simians, Monkey 1 also plans to start classes to tackle stress.
Note to brokers: it might not be such a bad idea to sign up, since markets - and the economy - could get much worse before they get better. It might also help to keep your stress medications by your side.
And what of the brokers? Well, as a Chinese proverb goes, they will be living in 'some very interesting times'. They may have edged past the Monkeys on skill last year, but they're going to need some hefty doses of good luck as well soon.
On behalf of the Monkeys and brokers, thank you for reading.
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Its a clear signal of victory. The benchmark indices, the Sensex and the Nifty have managed to outperform the monkeys and the brokers in the last 11 months or so as they rose by 6.3 percent and 7.4 percent, respectively.
Monkey 1 continues to hold its own, but Monkey 2 is still claiming to be a victim of life's banana peels.
Our Monkey Portfolio 2, a randomly picked 10-stock portfolio drawn from the BSE 500, is leaps ahead of the competition this week. Monkey 1 is licking his wounds, though.