3 MOMENTUM Indexes for HIGH Returns - LONG TERM Investing - Rahul Jain Analysis #index #investing
Summary
TLDRIn this video, Rahul Jen discusses the power of momentum index investing, comparing three indices: Nifty 500 Momentum 50, Nifty 200 Momentum 30, and Nifty Midcap 150 Momentum 50. He highlights their historical returns, volatility, and sector allocations, emphasizing that while momentum indices may be more volatile in the short term, they have outperformed traditional indices over longer periods. Rahul also provides guidance on how to invest in these indices through index funds and urges viewers to conduct their research.
Takeaways
- ?Í? The Nifty 50 has given around 18.94% yearly returns in the last 5 years, representing the top 50 stocks on the Indian Stock Exchange.
- 💵 The Nifty 500 Momentum 50 index has outperformed, yielding approximately 35.77% CAGR returns in the same period, nearly double the return of the Nifty 50.
- 💲 A comparison of returns shows that investing 10 lakh Rupees in the Nifty 500 Momentum 50 index could yield around 34 lakh Rupees, compared to 14 lakh Rupees with the Nifty 50.
- 💱 The video discusses three momentum indexes and their returns, risks, and strategies to educate viewers on momentum index investing.
- 💲 Nifty 500 Momentum 50 index has shown higher returns and higher volatility in the short term, but its long-term volatility is comparable to the Nifty 50.
- 💵 The Nifty 200 Momentum 30 index selects top momentum stocks from the Nifty 200 and has shown better returns than the Nifty 200 over various periods.
- 💲 Historical data indicates that the Nifty 200 Momentum 30 index has outperformed the Nifty 200 in 14 out of 19 years and has a higher Sharpe ratio, indicating better risk-adjusted returns.
- 💱 Volatility for the Nifty 200 Momentum 30 index is higher in the short term but aligns with the Nifty 200 over longer periods.
- 💵 The Nifty Midcap 150 Momentum 50 index focuses on midcap stocks with recent momentum and has shown better returns than the Nifty Midcap 150 index.
- 💲 The video suggests that there is little overlap between the Nifty Midcap 150 Momentum 50 index and the first two indexes discussed, making it a potentially good choice for diversification.
Q & A
What is the average yearly return of the Nifty 50 index in the last 5 years?
-The Nifty 50 index has given around 18.94% yearly returns in the last 5 years.
How much higher is the CAGR return of Nifty 500 Momentum 50 index compared to Nifty 50 in the last 5 years?
-The Nifty 500 Momentum 50 index has given around 35.77% CAGR return in the last 5 years, which is almost 16% higher than the Nifty 50 index.
What would be the difference in gains if one invested 10 lakh Rupees in Nifty 50 versus Nifty 500 Momentum 50 index 5 years ago?
-If invested in Nifty 50, the gains would have been around 14 lakh Rupees, but in Nifty 500 Momentum 50 index, the gain would have been around 34 lakh Rupees.
What is the significance of the beta value in the context of Nifty 500 Momentum 50 index?
-The beta value of Nifty 500 Momentum 50 index is 1.28 on a one-year basis, indicating it is more volatile than the Nifty 50 index, which has a beta value of 1.
How does the volatility of Nifty 500 Momentum 50 index compare to Nifty 50 over different time periods?
-On a one-year basis, Nifty 500 Momentum 50 is more volatile, but over a longer period (5 years, 20 years, 25 years), its volatility is lower than Nifty 50.
What is the reason behind the better returns of Nifty 500 Momentum 50 index compared to Nifty 50?
-Nifty 500 Momentum 50 index selects top 50 stocks showing momentum in the previous 6 months to 12 months, suggesting that winning stocks may continue to perform well.
What is the sector allocation percentage for capital goods in Nifty 500 Momentum 50 index?
-The capital goods sector has a 31.2% allocation in Nifty 500 Momentum 50 index.
How does the sector allocation in Nifty 50 differ from Nifty 500 Momentum 50 index?
-Nifty 50 is driven by market cap, with financial services as a major contributor at around 32%, whereas Nifty 500 Momentum 50 index is driven by momentum.
Which index fund is available for investing in Nifty 500 Momentum 50 index?
-Maul Oswal offers an index fund for Nifty 500 Momentum 50 index.
What is the one-year return percentage of Nifty 200 Momentum 30 index compared to Nifty 200 index?
-Nifty 200 Momentum 30 index has given around 68.91% returns in the last one year, compared to 4.39% returns by Nifty 200 index.
How does the Nifty Midcap 150 Momentum 50 index perform in terms of returns compared to Nifty Midcap 150 index?
-Nifty Midcap 150 Momentum 50 index has given slightly better returns than Nifty Midcap 150 index in the last one year and over a 5-year period.
Outlines
📊 Nifty 50 vs Nifty 500 Momentum 50 Index: A Comparative Analysis
The speaker introduces the Nifty 50 and Nifty 500 Momentum 50 indices, highlighting their respective returns over the last five years: 18.94% per year for Nifty 50 and 35.77% per year for Nifty 500 Momentum 50. The significant difference in returns is illustrated with an example showing that an investment of 10 lakh rupees in Nifty 50 would yield around 14 lakh rupees, whereas the same investment in Nifty 500 Momentum 50 would yield about 34 lakh rupees. The power of momentum investing is emphasized, and the speaker outlines the goal of the video: to discuss three momentum indices, their returns, and their risks, to educate viewers.
📈 Nifty 500 Momentum 50 Index: Performance and Volatility
The first index discussed is the Nifty 500 Momentum 50. The speaker details its returns: nearly 70% in the last year, 35% annually over the past five years, and 25% annually since its inception in 2005. Rolling returns are also considered, showing that this index consistently outperforms the Nifty 50 over three- and five-year periods. The concept of volatility is explained using beta, with the Nifty 500 Momentum 50 being more volatile in the short term but less volatile over longer periods compared to Nifty 50. The index's higher short-term volatility is contrasted with its stable long-term performance.
🔍 Nifty 200 Momentum 30 Index: Returns and Sector Allocation
The second index, Nifty 200 Momentum 30, is introduced. It selects the top 30 momentum stocks from the Nifty 200. The index has shown superior returns: 68.91% in the past year, 30.53% annually over five years, and 20.7% since inception. Comparison with Nifty 200 reveals that the momentum index consistently outperforms, with a historical pattern of outperformance in 14 of the past 19 years. The sector allocation shows a focus on automobiles and capital goods, unlike Nifty 200's financial services and IT sectors. Volatility analysis indicates higher short-term volatility but stable long-term performance.
🔄 Overlap and Diversification in Momentum Indices
The speaker compares the Nifty 500 Momentum 50 and Nifty 200 Momentum 30 indices, noting a significant overlap in top stocks like Trent Limited and Bajaj Auto. This suggests that investors might choose only one of these indices to avoid redundancy. The discussion then shifts to the Nifty Midcap 150 Momentum 50 Index, which focuses on midcap stocks and has distinct top stock holdings, making it a good candidate for diversification. The speaker emphasizes the importance of understanding overlap and diversification when investing in multiple indices.
📚 How to Invest in Momentum Indices
The speaker provides practical advice on how to invest in the discussed momentum indices. For Nifty 500 Momentum 50, investors can consider the Motilal Oswal index fund. For Nifty 200 Momentum 30, the speaker suggests using the Ticker Tape website to compare different AMC offerings based on various parameters like expense ratio and returns. For Nifty Midcap 150 Momentum 50, the same method of screening and comparing on Ticker Tape is recommended. The video concludes with an invitation for feedback and suggestions for future content, emphasizing the goal of providing valuable investment insights.
Mindmap
Keywords
💡Nifty 50
💡Momentum Index
💡CAGR (Compound Annual Growth Rate)
💡Volatility
💡Beta
💡Rolling Returns
💡Sector Allocation
💡Sharpe Ratio
💡Mutual Funds
💡Investment Horizon
💡Diversification
Highlights
Nifty 50 has given 18.94% annual returns over the last 5 years, while Nifty 500 Momentum 50 index delivered 35.77% yearly returns, nearly doubling the returns.
A ₹10 lakh investment in Nifty 50 five years ago would yield gains of ₹14 lakh, while the same investment in Nifty 500 Momentum 50 index would result in ₹34 lakh in gains.
Momentum investing focuses on stocks showing strong price momentum over the past 6-12 months, which has contributed to the outperformance of Nifty 500 Momentum 50 index.
The beta (volatility measure) of Nifty 500 Momentum 50 index is 1.28 over a one-year period, meaning it is more volatile than Nifty 50, which has a beta of 1.
Over a five-year period, the beta of Nifty 500 Momentum 50 index drops to 0.94, making it less volatile than Nifty 50 (beta of 1).
Nifty 500 Momentum 50 index’s sector allocation is skewed towards capital goods (31.2%), while financial services dominate Nifty 50 with 32% allocation.
The Nifty 200 Momentum 30 index, which tracks the top 30 momentum stocks from Nifty 200, has delivered 68.91% returns in the last year.
Over a 5-year period, Nifty 200 Momentum 30 index has given 30.53% annual returns, outperforming the Nifty 200 index, which delivered 21.5%.
Nifty 200 Momentum 30 index outperformed Nifty 200 index 14 times in the last 19 years, indicating a consistent trend of outperformance.
From a risk-adjusted return perspective, Nifty 200 Momentum 30 index has outperformed Nifty 200 index 16 times over the last 19 years.
Nifty 200 Momentum 30 index shows higher volatility in the short term with a beta of 1.24 compared to Nifty 200's beta of 1.05.
Nifty 200 Momentum 30 index's sector allocation is heavily weighted towards automobiles and auto components (23.62%) and capital goods (20%).
There is significant overlap between Nifty 200 Momentum 30 index and Nifty 500 Momentum 50 index, with both including stocks like Trent, Bajaj Auto, and Mahindra & Mahindra.
Nifty Midcap 150 Momentum 50 index, which tracks the top 50 midcap momentum stocks, has delivered 66.13% returns in the last year.
Nifty Midcap 150 Momentum 50 index has given 39.93% returns over 5 years, outperforming the Nifty Midcap 150 index, which delivered 31.92% returns.
Nifty Midcap 150 Momentum 50 index has minimal overlap with Nifty 500 Momentum 50 and Nifty 200 Momentum 30 indexes, making it a more diversified choice.
Transcripts
hi friends have a look at my screen and
you will see that nifty 50 in The Last 5
Years have given around 18.94% yearly
returns in The Last 5 Years and this is
the most widely used index because
nifty50 represents the top 50 stocks on
our Stock Exchange while at the same
time Nifty 500 momentum 50 index has
given around
35.77 cagr return in The Last 5 Years so
almost an extra 16% every year is what
Nifty 500 moment 50 index has managed
and just to put this difference in some
context if you invested 10 lakh Rupees 5
years ago in nifty 50 then your gains
assuming 19% C returns would have been
around 14 lakh rupees but if you
invested the same 10 lakh Rupees in a
Nifty 500 momentum 50 index then your
gain would have been around 34 lakh
rupees so more than twice the return is
what Nifty 500 momentum 50 index has
generated in The Last 5 Years and this
is the power of momentum index investing
in this video I'll speak about three
momentum indexes and I will run you
through with their returns with their
risks so that you can get educated about
three momentum indexes my intention is
to share critical data points with you
for you to make decisions none of these
indexes are recommendations so please
make sure you also do some research at
your end and people who don't know me my
name is Rahul Jen I'm a full-time
investor and a full-time content creator
with that let's start with index number
one so first index is Nifty 500 moment
50 index and if I talk about Point too
returns first in the last one year this
index has managed to give almost 70%
returns in the last 5 years it has
managed to give around 35% Returns on a
yearly basis and if you look at since
Inception so the base date of this index
is first of April 2005 the index has
managed to give around 25% yearly
returns and these are Point to-point
returns and whenever we are investing in
index funds or mutual funds we have to
look at the rolling returns also to
bring consistency into the returns so
for that have a look at my screen and
you will see if we compare Nifty 500
momentum 50 index with nifty 50 most
widely used index and if you compare on
a threeyear rolling returns basis then
from a average return perspective it has
managed to give 20.2% yearly returns
which is almost 8% or 7 to 8% higher
than the nifty50 returns if we check the
fiveyear rolling returns clearly it has
done better than nifty50 giving 19.6%
returns but you will also note that the
minimum returns or the losses here are
higher on the three-year rolling return
basis it is minus 15.3% and also on a
5year rolling returns basis and that
brings me to the volatility of this
index extremely important concept that
we need to understand and volatility in
simple terms is how much the fluctuation
is happening in index funds nav and the
majority of volatility is beta let me
give you a very simple explanation so
the value of beta for nifty 50 index
most widely used index is at one while
the value of beta for Nifty 500 momentum
50 beta is on a one-ear basis is 1.28
what does this simply mean is that if
nifty 50 or Nifty Falls by 1 then Nifty
500 momentum 50 is going to fall by 1.28
it is going to fall more so from a
volatility perspective on a one-ear
basis Nifty 500 momentum 50 beta is
slightly higher value therefore it is
more volatile so if nifty 50 falls this
is going to fall even more so this is on
a one-ear basis but more interestingly
if you look at the 5year basis or since
Inception you will see that volatility
of this index is in fact lower than the
nifty 50 so if nifty 50 falls by 1 it is
going to fall by .94 on a 5year basis if
Nifty Falls by one on a longer period 20
years 25 years basis then this is going
to fall by only 88 so the key takeaway
here is that shortterm duration this
index is volatile and if you're only
looking for short-term Investments this
might give you lot of volatility and
many people are not comfortable with
volatility right now the stock market
are all-time high and if there's a
correction then there is going to be a
shortterm pain but over a longer period
of time this index has not shown higher
volatility than the nifty50 now comes
the natural question so Rahul we
understood about the volatility what
about the returns why is it that Nifty
500 momentum 50 index has managed to
give better returns than nifty50 it is
mainly because in this index top 50
stocks are selected from the 500 stocks
and only those 5050 stocks are selected
that have shown momentum the price
momentum in the previous 6 months to 12
months and the entire thesis is that a
winning stock may continue to win for
some more time therefore there is a room
for some further rallies and if I show
you the latest top 10 stocks held in
this particular index you are going to
note stocks like Trent limited have been
in a massive Bull Run Bajaj Auto adani
ports bhat Electronics limited these are
the stocks that have been in massive
momentum in the last 6 to 12 months and
that is what is being selected in this
particular index and if you look at the
sector allocation you are going to note
that this index has got
31.2% allocation in the capital goods
which has been in a very very high
momentum while the financial services
are only at 177% now if I show you the
nifty50 sector allocation and top stocks
let's do a quick comparison and you will
see that in nifty50 financial services
is the major contributor by around 32%
and if you look at the top 10 stocks
you're going to see stocks like HDFC
Bank Reliance Industries I CA Bank these
are the heavy weights and here nifty 50
is mainly driven by the market cap while
Nifty 500 momentum 50 index is driven by
the momentum and that is why it is a
different style of investing altogether
okay Rahul how to go about investing in
Nifty 500 momentum 50 index so this is a
fairly new method of doing index
investing and I could only find one
Index Fund for Nifty 500 momentum index
and that is by mual oswal right now
their nfo is going on and you can you
can check it out if you are interested
to invest in Nifty 500 momentum 50 index
with that let's move to index number two
which is Nifty 200 momentum 30 index the
concept is very very similar that rather
than investing in Nifty 200 if we select
30 top index that have been in momentum
recently then this index comes into
picture which is Nifty 200 momentum 30
index if I talk about the returns
pointto Point returns here very quickly
last one year this index has given
around 68.9 1% returns and if I compare
that with Nifty 200 index that Nifty 200
index has given 4.39% returns so
momentum index has performed better on a
one-ear basis on a 5year basis it has
given 30.5 3 versus Nifty 200 of
21.5% even on a 5year basis this Nifty
200 momentum index has performed better
than the Nifty 200 index and on a longer
term basis as well if you see since
Inception it has given 20.7 n% returns
while the Nifty 200 index has managed to
give around 15.26% yearly Returns what
about Nifty 500 momentum 50 index that
we just talked about index number one
and if we compare that on a one-ear
basis it is neck to neck there is not
much difference but on a 5year basis
Nifty 500 momentum 50 index has given
35.77 return while the Nifty 200
momentum 30 index has given slightly
lower 30.5 3% returns so from a
historical data perspective Nifty 500
momentum 50 index has performed slightly
better than Nifty 50200 momentum 30
index but it does not necessarily mean
that this is how the future is going to
be as past returns does not guarantee
the future returns now here is more
interesting data if we compare last 19
years and if you look at number of years
that Nifty 200 momentum index has
outperformed Nifty 200 then out of 19
years 14 times it has outperformed Nifty
200 so there seems to be a pattern here
that Nifty 200 momentum index has
outperformed Nifty 200 TR index and and
also from a risk adjusted returns
perspective that can be measured by
ratio such as sharp ratio we look at the
last 19 years out of the last 19 years
16 times Nifty 200 momentum index has
beaten or outperformed Nifty 200 TR
index if I speak about the rolling
Returns on a last 3 years daily rolling
return basis 88% of the time it has
outperformed Nifty 200 TR index while on
a 5 years daily rolling returns basis
99% % of the times it has outperformed
Nifty 200 TR index what about volatility
Rahul so from a volatility perspective
have a look at this data last one year
this has been more volatile 1.24 versus
1.05 definitely this is more volatile in
shorter term but if you look at the 5
years data or or longer period of time
20 years 25 years it is slightly better
than Nifty 200 TR index so again the
conclusion is very similar here that if
you're looking for a shorter term
investment then there is likely to be
more more volatility in the momentum
index but over a longer period of time
more than 5 years of time that
volatility really is not playing out in
the cases of momentum indexes if I do
the sector comparison between Nifty 200
and Nifty 200 momentum 30 index very
clearly you will note that here in Nifty
200 momentum 30 index the maximum
allocation around
23.62 has gone to Automobiles and auto
components followed by the capital goods
at 20% while in case of nifty 200 it
remains market cap driven and financial
services followed by it are the two top
sectors and if I compare the top 10
stocks between Nifty 200 and Nifty 20000
momentum 30 index again a very
contrasting view here that it is not
driven by the heavy weights from a
market cap perspective stocks like Trent
Limited tataa Motors ntpc are the ones
that are taking the Limelight or taking
the loin share in this particular index
versus the Nifty 200 where likes of HDFC
Reliance icic driven by totally market
cap now comes really really interesting
point that if you look at the top 10
stocks of the first index that I talked
about Nifty 500 momentum 50 index and
Nifty 200 momentum 30 index you see
there is a lot of overlap so Trent
limited is in both Bajaj Auto is in both
Mahindra and mahra is in both recc is in
both right so the key takeaway here is
that Nifty 200 momentum 30 index and
Nifty 500 momentum 50 index index number
one and two there is a likelihood of a
massive overlap between these two so
therefore if you if you want to have a
diversified portfolio I would say that
instead of adding both of these you
might want to add only one of these okay
Rahul how to go about investing in Nifty
200 momentum 30 index simply go to this
free website called ticker tape.com
mutual funds start screening and you're
going to see a screen similar to this in
the equity section go ahead and tick
Index Fund so it will bring all the
index funds but then you add another
parameter here which is called Benchmark
and in this Benchmark you type momentum
and you will see the Nifty 200 momentum
30 TR select that and you are going to
see all the AMC's that are offering this
particular Index Fund you can now go
ahead and do comparison of these AMC's
in terms of their expense ratio in terms
of their average rolling returns last
one year's absolute returns and sharp
ratio and so on and so forth and you can
make your decision based on what your
really parameters are you can add a lot
of other parameters here and do lot of
comparison and Analysis and based on
what you are really looking for you can
go ahead and select your AMC and so far
if you're liking this video hit the like
button let me know in the comments a
simple thank you it will motivate me to
come up with such content for you at
zero cost and also let me know any other
topics you would like me to create
videos around in terms of mutual funds
index funds ETFs or any stocks I would
be happy to read the comments and create
upcoming videos for you with that let's
move to index number three which is
Nifty midcap 150 momentum 50 index again
very similar concept this index tracks
50 stocks that have been in recent
momentum but it selects it from the
midcap stocks which are 15 50 stocks
from stock number 101 to 250 so midcap
is the universe from a selection point
of view but it selects 50 stocks out of
those 150 midcap stocks now if we
compare this with Nifty midcap 150 index
from a returns perspective last one year
this index has managed to give around
66.1 3% returns while the Nifty midcap
150 index itself has given around 50%
returns so we know that midcap stocks
have been in a massive Bull Run in the
last one year but this index has managed
to give even slightly better returns
than the midcap 150 index if you compare
the 5 years of History this index has
managed to give 39.9 3% cagr returns
while Nifty midcap 150 index has managed
31.9 2% and also if you look at the
longer term duration more than 5 years
you will notice that this index has
managed to give better returns 25.3 n%
returns compared to 18.64% cagr returns
by Nifty midcap 150 index now
unfortunately I do not have the rolling
returns data I could not find rolling
returns data for this particular index
something that we definitely need to
look for but unfortunately I could not
find it if any of you are able to find
the rolling returns data please let me
know in the comments it'll be a very
good value addition for all the viewers
who are watching this video but moving
on if we compare the volatility of this
index very similar story here on a
one-ear basis the beta is 1.14 versus
1.03 of nifty midcap 1550 index on a
5year basis almost similar exactly same
85 and on a longer term basis it is 80
lower volatility than Nifty midcap 150
index by 84 so almost very similar
volatility here again the key takeaway
is very similar that if you're only
investing for shorter duration of let's
say one year then this index is likely
to be more volatile than the Nifty
midcap 150 index if you do the sector
comparison between Nifty midcap 150
momentum 50 index versus the Nifty
midcap 150 index again here you will see
that the capital goods sector has got
the maximum allocation by 19.59%
while in case of nifty midcap 150
Financial Services remain at number one
but there capital goods is at number two
15.51% now if you compare the top 10
stocks between the momentum and the
normal index you are going to see that
there is some overlap here for example
Dixon technolog is in both of them
commins India limited is in both of them
Lupin limited is in both of them PB
fintech is in both of them so here there
is something very different that the
Nifty midcap 150 and the Nifty midcap
150 momentum has at least some level of
overlap but here is the more interesting
fact the index number one which was
Nifty 500 momentum 50 index that we
talked about index number two Nifty 200
momentum 30 index and this index has
very little overlap I think there is no
overlap if I see the stocks here Dixon
Technologies is not there cins is not
there in any of the previous indexes oil
India is not there so it's entirely
different top 10 stocks and the key take
away here is that it is not overlapping
a lot with the first two index and
therefore people who want to invest in
momentum investing my suggestion here
will be that Nifty 200 momentum and
Nifty 500 momentum they have an overlap
so one of them can be selected while
Nifty midcap 150 momentum is not showing
any overlap it might be the second index
that you might want to consider again
not a recommendation but this data is
telling us about overlap that is very
very important when you invest in mutual
funds okay Rahul how do we go about
investing Nifty midcap 150 momentum 50
index it's very easy go to Ticker
tape.com a free website I'm not doing
any promotions for them just go to
mutual funds and say start screening you
will come back to the screen exactly the
same method go ahead and select the
index fund in the equity section here
and then go down and add Benchmark here
which is going to be in this case Nifty
midcap 150 momentum 50 index you're
going to see the list here updated list
and what you can do is compare these
basis on the expense ratio compare them
basis on the last one-ear return sharp
ratio so there are lot of parameters
that you can add and do some analysis on
this particular index so in this video I
have spoken about three momentum index
says let me know in the comments which
momentum index is your favorite index
and have you really gained some
knowledge in this video or not I would
love to read your comments your comments
will motivate me to come up with such
content for you more often with that
I'll see you in my next video Until then
keep rocking
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