These secrets can help you get superior risk-adjusted returns across market cycles

Market

The glare of returns amuses investors. While a lot of factors and historical data points are looked at while evaluating the performance of a fund manager, delivering consistent risk-adjusted outperformance requires lots of hard work and dedication.

While we see many successful investors sharing quotes, stories, and ideas of wisdom, we identify the key as keeping it simple and disciplined.

Here, we would like to discuss some secrets we have imbibed for delivering consistent superior risk-adjusted returns across market cycles.

An investor should have Defined Boundaries for his investment philosophy. Setting this up takes experience, analysing self and investment goals. Shifting the boundaries basis shift in market cycles can be counterproductive.

An investor should separate emotions from investment decisions and take a Disciplined approach for allocation and exit. Short-term market movements should not overpower the Depth and Diligence of fundamentals.

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Co-founder|Green Portfolio

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You have to diversify your portfolio across stocks, and themes, and not over diversifying or under diversifying. Taking a staggered allocation and divestment approach, patience with your allocations and regular follow-up research on the portfolio companies has always helped us deliver. If you find red flags post-investing, tough calls have to be taken.

In times when markets are tough, rebalancing the portfolio, and concentrating towards better value and fundamental stocks have always helped our investment portfolios.

While you cannot predict every macro situation, understanding the important factors and keeping a close track is necessary. Also, you cannot capture every trend or theme, you should respect that you have limited time and should focus on the ideas that you select.

You should keep an eye on the market action of your portfolio companies but not get swayed by every movement and evaluate the reasons.

You should look at the value on the table, read between the lines of the commentaries, and keep an eye on Qualitative factors while being objective on the quantitative factors. You can copy research ideas but they should meet your philosophy and you should have your homework done. You should always have a buffer in your investment period while allocating capital, as markets can test your patience for a long period.

You should be contrarian but try to enter when the trend starts playing out. This way, you are protected from significant downside risk.

We have identified the execution of trades as a very important factor. There should be discipline, setting aside emotions, and staggering wherever possible while executing buy and sell.

You should understand your strengths, and understand that you need not have allocation to every single sector. Invest in sectors you are comfortable with and in stock of companies of which you are able to understand the business and its basic processes. The more you know, the lesser the risk!

All of these principles have helped us deliver exceptional value to our investors and even outperform the outperformers in the long run.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.