I have been writing here for more than 3 years. There have been more than 2200 posts.
On Quora, my answer views are nearly 15 Million.
But a small 70 page book now available on Amazon has generated some interest. I am happy for it. Genuine questions lead t good debate and better understanding.
Today, we will talk more abut the theme of the book — Doing Nothing to make money.
Well, almost nothing. Just 1 trade per month over 113 months delivering a profit of Rs. 511000 on a capital of Rs. 162000.
Before we get to the main question and answers, here is the link to Amazon where you can see the Book Details and 25 reviews. You can also buy it here:
I got this question in the mail:
Well, I am happy that the reader has worked out the compounded annual return.
Fact — Buying 1 ITM CALL per month and DOING NOTHING after that would have given better results than investing in NIFTY index.
More on the return and comparison:
In the book, I have kept the theme simple. Buy and do nothing. Take what the market gives. The 113 month period is long enough to be a standard time frame. If I had begun in 2011, that year would have been a loser. So what?
Year 2009 and 2010 would have been very good gaining years. Let us not pick up a time frame to find the failure.
Investing in NIFTY or a Portfolio of good stocks:
When we invest like this, the compounding is working all the time. As the prices keep going higher, it is the entire portfolio value which keeps on gaining.
Let us say we begin with Rs. 300000 and NIFTY gains 10% in the first year. Now we have Rs. 330000 at the end of 1 year.
Second year, NIFTY gains 18%.
This gain is on Rs. 330000 and now we have Rs. 389000.
This goes on year after year and compounding works to give good results.
It is time in the market and not timing the market which makes money.
Buying ITM CALLS:
If we buy 1 ITM CALL about 5-6% from the current index level, that has got a lesser component of time premium.
In case of market up move, the gains are good.
If the market goes down, the maximum loss is the premium paid.
That is how options work.
Here we are putting in just a part of our trading capital to begin the trades.
Out of initial Rs. 100000, only about Rs. 15000 got used for the first trade. Capital is considered around 6 times the trade value to tide over the losing periods.
We have not compounded the results here.
Just stayed with 1 single trade all the time.
If number of lots was doubled when the capital became double and again when it became 3 times, the returns would have been much better.
I believe that readers can work that out for themselves. I have got some very intelligent minds here.
This shows that the comparison made above is not the right comparison. Our results are far superior than the NIFTY gains.
I can not say about the specific stock portfolio.
In 2011, SBIN, RELCAPITAL, TATAMOTORS etc. would have been a part of a good portfolio. All would have damaged the results. NIFTY keeps on adjusting by taking out the non performers and bringing in the better stocks of the moment.
It is doubtful that a selected portfolio would have done better than the index.
This fact can be verified by looking at the growth of most mutual funds over the same period. Not many of them would have done better thsn NIFTY.
Surely, some of them will do better. But you and me may not be that good to select a portfolio.
I could not get the 10 year data. Let us have a look at 5 year numbers:
All made good money over last 1 year.
Over last 5 years, the returns are quite average.
And people tell me that my method made money just because of the big gain in NIFTY from April 2020 onwards.
Yes, I agree.
Since we are trading NIFTY CALLS, we gain from NIFTY up move.
But how did all these funds made money?
From the same NIFTY gain from April 2020 onwards.
If they got it right, they are smart, sharp and intelligent. Their investing acumen is appreciated.
If plain simple Option Buying got it right, I am just lucky. No other adjective like those mentioned above for the poor trader like me.
Loss Making Years:
Some readers have selected 2015 and 2016 to pick holes in the theory.
Well, there was a big loss and small loss in those two years.
Does anyone make money all the time in the market?
We are ignoring almost 8 years of profit and focusing on 2 losing yeards. Wrong approach to trading. Option buying will have its losses, many of them actually but eventually work out.
Can’t face the heat, get out of the kitchen but don’t expect the gourmet meal after that.
In the present brouhaha of the new highs, everyone has forgotten how the mutual funds returns looked in March 2020 or even few months later.
They got lucky, they made money.
No special intelligence was required.
What is sauce for the gander is the sauce for the goose. No double standards.
The method ( let us not call it a strategy) given in the book works.
It gives better results than what most professionals have managed. Some of them surely do better, but we are not trying to be the best. We are here to just make a profit by DOING NOTHING.
Simple things work, it is difficult to believe.
Most traders are losers, how can they believe that something so simple could make money?
Facts do not lie. Let us not ignore the facts.
Enjoy the weekend and BUY the book if not already done.