The Global Markets have been enduring high volatility during the last few weeks due to falling oil prices and interest rate increase in US on the back of weak China. As an economy that is connected to global markets, Indian markets remain volatile.
In this situation, most of retail investors feel unsure and unsafe about their investments. Should you be really worry about your investments?
The real test of the portfolio is its ability to withstand the Market fall.
AY model portfolio “Long term moderate Portfolio” has seen a fall of only 3.05 % as against NIFTY which has gone down by more than 10% in 2016. A look at Fig 1.1 compares our returns with NIFTY from Jan 1, 2016 to Feb 23 2016.
Fig – 1.2 shows the comparison of our portfolio with that of other leading mutual fund platforms in India. Our Long term moderate portfolio returned negative 2% over last year whereas the other portfolios could not withstand the market downfall. It reinforces our belief that a well-diversified portfolio has to withstand such volatility.
Imagine a scenario where there is a 12% fall in the market, one has to earn over 14% of returns to get back to one’s initial investment. Can your portfolio really earn you such return?
How and Why ArthaYantra Portfolios Outperform?
There are two types of risks:
- Systematic or Market risk.
- Unsystematic risk or diversifiable risk.
Diversification is the key step to reduce unsystematic risk. To achieve this AY diversifies the portfolio allocation across 8 asset classes. AY creates over 100 portfolios to fit the needs of diverse customer base we have. To drive the correct recommendation after going through 15 million scenarios, AY uses the most renowned and proven Markowitz Portfolio Theory.
We calculate various metrics like Alpha. The excess returns of a Portfolio relative to the return of a benchmark index is the portfolio’s alpha.
This diversification of assets also ensures lower Beta (β), Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.
Fig 1.3 shows the comparison of various metrics with ArthaYantra Long term moderate portfolio and to that of the leading MF platforms in India.
ArthaYantra follows a strategy of “High Alpha and Low Beta” portfolio. It ensures that the risk of the portfolio is always below the benchmark but would still generate returns above the threshold.
As from fig 1.3 The Sharpe ratio of our portfolio is 1.2 and Sortino Ratio is 1.5. Any portfolio with a Sharpe ratio of 1.2 and Sortino ratio of 1.5 and above is considered extremely efficient. All of ArthaYantra portfolios have a Sharpe of more than 1.
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