We started Capitalmind Premium League [for CM Premium members] last year – a fantasy stock-picking exercise for Capitalmind Premium subscribers.
The idea was to put ourselves in the shoes of the fund manager and take bets on stocks to beat the market in the coming year.
But then, stock picking, in one sense, is a behavioural exercise; it’s not about picking what you like. It is more about sizing what others may like. In his beauty contest analogy, Keynes likened it with how participants would behave in a contest to choose the most beautiful faces from several hundred photographs.
The winners would be the ones chosen to be the most popular, and therefore contestants would be better off guessing the tastes of the majority. Then there is also this forward-looking aspect to the markets. You need to guess what the majority would prefer in the future.
While we wanted to have as much fun doing this exercise, the market has different plans in store. The year-long rally meant most portfolios did well.
Here is a round-up of the 2021 edition and announcement of the next one!
Some insights from the 2021 edition
What was the popular stock picks among the premium subscribers?
- A total of 209 teams participated, including 5 bots that picked 248 unique stocks from NSE500
- 1 in 3 portfolios had Nasdaq 100 ETF allocation
- 47% of the portfolios had at least one index fund (Nifty, Nifty50, N100)
- 22% of the portfolio had a Gold allocation (that eventually gave negative returns)
What we thought would work, and what actually worked?
Financial Services, Index funds (N50, NN50, N100 ), and Consumer Goods stocks contributed to 45% of all the picks. The average returns of the stocks from these industries did not “considerably outperform” the Nifty 50.
Now, let’s see what actually worked out.
No one, in their wildest of dreams, would pick a power stock in the middle of the pandemic with worldwide lockdowns. But hey, few thought differently. Power stocks that gave a staggering 112% constituted just 1% of all the picks, followed by metals (3% of the total picks) that returned 105% over the year. “You can’t go wrong with IT” seems to be working well with CPL too, which gave 103% returns.
Drilling down further shows that the instruments where most participants bets didn’t even beat Nifty 50 except for Nifty Next 50. The popular conservative bet (of 2020) on Gold gave negative returns.
And, the stuff that worked didn’t get picked by even 2% of the participants. That’s one more indicator showing how difficult stock picking can be.
The winners take it all!
All the top 10 winners get Capitalmind goodies and bragging rights for the year coming by. Here is the leaderboard:
What have we learned from the 2020 edition?
- Avoid recency bias. Things that have worked recently (like gold in 2020) may probably not work in the future. In other words, be forward-looking.
- Take cues from Keynes. It’s not about what you think. It’s about what the crowd would think over the year.
- Remember, you exactly have 1 year—a little less on fundamentals and a little more on price.
- If you’re not in the top 10, it doesn’t matter. Very aptly here – the biggest risk is not taking one.
- More such tips will anyway be discussed on the #general-finance channel on slack.
Introducing Capitalmind Premium League 2022
Objective – To step into the shoes of a fund manager/asset allocator with a 1-year view and try to beat the market with a fantasy portfolio. Note, this is a theoretical exercise and does not involve actual money.
CPL Rules
Rules are basically the same as last year with some modifications.
- Each participant picks exactly 5 distinct investment instruments from the list and holds them until next year. (CPL is open to Premium members only)
- To keep things simple, each investment instrument carries 20% weight in the fantasy portfolio.
- Each holding can only appear once in your list. In case of repetition, the entry will be disqualified.
- No rebalances through the course of the year.
- We’ll adjust for Corporate actions like Split & Bonus. All other corporate actions, including dividends, will not be adjusted.
- The instruments to choose from:
- Stocks in the NIFTY 500
- Three Index ETFs (SETFNN50, SETFNIF50, Motilal Oswal Nasdaq 100)
- GOLDBEES
- SBI 1 Year Fixed Deposit (offering 4.90%)
- For clarifications on rules, please ping us on the #helpdesk channel.
We will share the winners 1 week before the 2022 Muhurat trading day. We’ll also share regular leaderboards to show how everyone is doing.
How can I participate?
Premium members will receive an email with a link to a simple form to submit their fantasy stock picks. The link will also be posted on the slack channel.
Please make sure to enter your Capitalmind registered email id. Only entries received before 3.30 pm on 12th November 2021 will be eligible for participation. The portfolio will consider closing prices for 12th November as the buy price of the portfolios.
Go on, channel your inner fund manager, and let’s see where you find yourselves on Diwali 2022! Ping us on #long-term-stocks or #helpdesk for any queries 😃
This Diwali, we’re offering new members the opportunity to experience Capitalmind Premium for the first time.
For 30% off on the annual plan, get complete access to
- premium articles
- model portfolios
- NIFTY+Futures trend-following strategy
- an enriching forum of members consisting of newbie investors and veteran investors
