End of Year Review: Strategies to Maximize Profits in 2024
In the turbulent world of investments, making informed decisions can be a daunting task. This year has been particularly eventful for the Indian investor community, with multiple market storms testing the resilience of portfolios. However, amidst the chaos, one platform has stood out – Genius.
Genius, a multi-asset allocation service, has undergone its first major upgrade, aiming to enhance returns for its investors. The key focus of this upgrade is to reduce churn and risk, and increase returns, setting Genius apart from traditional investment methods.
The data provided is for the past two years ending December 2023, and includes two months of back-tested returns. During this period, the NIFTY scarcely delivered any returns, while Mid and Small-cap indices gave minuscule returns. In stark contrast, all Genius portfolios, including short, medium, and long-term horizons, have delivered better returns.
One of the significant advantages of Genius is its ideal asset allocation for each investor every month, which reduces volatility and optimizes returns based on market conditions. This strategy has proven to be particularly effective in the Genius High Growth portfolios of Mutual Funds and stocks, where investors generated higher XIRR compared to those who made lump sum investments.
The importance of strategic asset allocation in investment returns cannot be overstated. Research indicates that asset allocation alone accounts for more than 90% of a portfolio’s long-term performance variability, while stock or fund picking drives a much smaller portion of outcomes. Asset allocation involves dividing investments among broad asset classes, managing risk, and maximizing returns by capturing gains from different market segments and smoothing volatility over time.
Strategic asset allocation combined with regular rebalancing helps align the portfolio with investor risk tolerance and long-term goals, which is essential in driving portfolio returns more reliably than selecting individual funds or stocks. Empirical evidence shows that investors often underperform their assets due to poor timing or security selection decisions, reinforcing that the broader allocation strategy is the dominant factor in success.
In contexts similar to Genius High Growth portfolios, incorporating alternative asset allocations or diversified exposures can boost returns further and reduce risk compared to concentrating on a few funds or stocks. The primary driver of long-term investment returns, including in high growth portfolios, is the strategic asset allocation decision that balances exposure across asset classes and adjusts to market conditions.
The upgrade has also helped reduce the frequency of incorrect asset allocation moves. Over 77% of investors in short-term portfolios, 81% in medium-term portfolios, and 85% in long-term portfolios have experienced better returns. Despite markets generating a 14.05% XIRR, most investors failed to generate similar or better returns.
Looking ahead, Genius is planning to make further improvements every few months or quarters. The platform will celebrate its second anniversary in two months. The key to making good returns in the market, as Genius emphasizes, is giving time to investments, a strategy often overlooked by investors.
Investors are reminded that the information provided is not investment advice, and no decision should be made based on it. The data is on a best-effort basis, and there is no guarantee of its accuracy. Genius investor returns are for investors who have rebalanced within 7 days of rebalancing.
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[2] Brinson, G. P., Singer, L. J., & Beebower, D. H. (1986). Determinants of Portfolio Performance II: An Update. Financial Analysts Journal, 42(3), 39-46.
[3] Grinold, R. C., & Kahn, R. L. (1999). Active Portfolio Management. McGraw-Hill.
Investing in personal-finance through platforms like Genius can enhance returns by reducing risk and churn, setting it apart from traditional investment methods. Strategically allocating assets across broad asset classes, as Genius does, accounts for over 90% of a portfolio's long-term performance variability, as research suggests. This strategic asset allocation, combined with regular rebalancing, helps drive portfolio returns more reliably than individual fund or stock selections.
