Is Buy and Forget a Myth?

I did have a very amateurish portfolio in the initial years, which I started in Nov 2016 and liquidated in 2017, after I feared that my random selection of stocks will be perilous. That time I invested in stocks by screening them on the basis of ratios without context, and some through borrowed convictions from social media, especially valuepickr… Few days back I was thinking of making a small experiment as to determine how that portfolio would’ve performed, had I not liquidated it and rather kept it in a coffee can.

At the time of liquidation, it had 82 stocks with almost equal weightage, mostly in small-mid cap. The time of the experimentation also seemed perfect because the smallcaps seemed to have undergone a complete cycle from 2017 upcycle to 2018-19 downcycle, to current upcycle.

The result in fact shocked me… I found that the portfolio yielded a CAGR of about 16.1% since inception. In the past 5 years the CAGR was 17.5% which means it would have beaten BSE 500 TRI return of 14% handsomely!! In fact, the return should actually be a bit greater as Value research portfolio software didn’t include some demergers properly.

This happened despite that portfolio containing DHFL, Vakrangee, Sintex Plastics, Talwalkers, SREI, Zee Learn etc.!!!

I found that the portfolio outperformed because the accidental good selections outgrew the losers.

This portfolio even outperformed the other experimental concentrated portfolio in 3 year basis. I feel that is mainly because in that portfolio the top 5 outperformers became almost 70% of the portfolio and their recent sluggish performance had caused that portfolio to underperform. In this portfolio top 10 stocks contributed 35% of portfolio weightage, and so underperformance of any hasn’t affected the portfolio significantly.

This portfolio has beaten my current portfolio by a massive margin in last 3 years.

Conclusions:

1. Even a randomly selected portfolio can perform decently if kept untouched.
2. Portfolio size doesn’t matter much if the coffee can is kept for a very long time.
3. Buy and hold works best in small-mid cap space.
4. Borrowed conviction from a good companion like Valuepickr helps even a noob to outperform market in buy and hold mode.

Lastlly, following are the list of stocks with weightage. This is strictly not an investment recommendation and is shared on academic interest. I do not hold many of these stocks in my current portfolio.