Beat the market with no stress
This stable portfolio overperforms the S&P (10-year simulation)
Is fear of volatility what’s keeping you from investing in individual companies? Totally get that.
Maybe you’re new to this game and want to start on a soft note;
Or perhaps, you already built a 6/7 figure portfolio and want to adjust your risk-tolerance.
Anyways, here’s the good news: you can do very well also by making your portfolio less volatile than a standard ETF.
In today’s episode, I’m going to prove that. Stay with me!
If you’re new, don’t miss out some of my recent updates:
Let’s dive in!
Portfolio Simulation
Here’s the little experiment I did.
I wanted to prove how lower volatility and higher returns is actually not always a trade-off. You can have both.
In short, I simulated a 10-stock portoflio with the usual support of Finchat. How did I select the holdings? Very simple:
Beta (5Yr) < 0.6
Free Cash Flow Margin > 15%
Listed in: US exchanges
Market Cap > $50B
Within my circle of competence
I typed my request in the Finchat AI-powered box, and here we go:
Final result? I narrowed down the sample to these 10 names:
➡️ Procter & Gamble, Walmart, Regeneron, Coca-Cola, London Stock Exchange Group, Novo Nordisk, Bristol Myers Squibb, Abbvie, Merck & Co., CME Group.
Then, I went back 10 years and simulated a one-off purchase of these 10 stocks with equal weight.
What would you guess? Has this portfolio beaten the S&P 500 since Jan 1, 2015?
The answer is… yes:
‘No Stress’ Portfolio CAGR (Compound Annual Growth Rate) → 12.2% (without dividends)
SPY (tracking S&P 500 index) CAGR → 11.2% (without dividends)
While 100 bps may not sound an impressive overperformance, it is also true that this would generate an exponential difference over long periods of time. With much less stomach pain than usual!
Plotting the simulation on a chart, you can see how smooth this portfolio would have been, especially:
In 2020, with a less violent Covid-crash
In 2021, with a less pronounced price bubble
In 2022, with a much softer drawdown compared to SPY
Not bad, right?
A few considerations
As usual, some considerations are necessary:
I do not consider volatility a measure of risk, but again, I understand those of you who may want to keep it under control.
I ran this experiment once only → to validate the idea, I should pick other names as well to see if the hypothesis holds up more strongly. I will do this in the future for sure.
In my opinion, a low Beta should never become the main driver of your investment decision. It’s just a parameter that eventually completes a big picture where business quality is the most important factor.
Would you consider such portfolio?
Speed up your quality research
Finchat has brought a significant improvement in my investing life. This is not a paid mention, but a genuine appreciation for what I use regularly.
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Is this you?
👇🏼
You would like do allocate a portion of your main investments to individual companies, but lack a proven method
You would love to become a 100% confident equity investor
You’re struggling to achieve satisfying returns
You don’t know how to properly value the companies you love
You don’t have enough time to manage all that
You are in the right place.
⭐ My mentorship program will start in 2025! ⭐
If you’ve carefully read this far, it means you’re probably among the top 5% more motivated ones.
And since slots will be very few, I don’t want to announce this too loudly. You are probably the one I’d love to work with.
➡️ Drop me a message or email and we’ll chat about your specific situation to understand if and how I can help.
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Thank you again for your valuable time.
Happy Investing,
Francesco - Business Invest