This is the seventh year that I've published my New Year NAPS Portfolio - seven is supposed to be a lucky number. I am though starting the year with some trepidation about the state of the markets. On the one hand, there's a wall of stimulus continuing to come through, both fiscal and monetary, which should continue to support equity momentum; but on the other hand, this liquidity is papering over the reality that much of the western world is deeply insolvent. I certainly don't have a macro crystal ball, but I'm aware enough to understand that there will be a reckoning at some point. But not... quite... yet. In the meantime, while the music plays, we dance.

If you are new to the Stockopedia service, the NAPS is my "no-admin-portfolio-system" - an illustration of how to use the StockRanks to construct a well diversified portfolio with a good probability of success. It's a process that can be run in less than an hour per year and has a strong track record of market beating returns - in fact it's returned 17% annualised over the last 6 years as you'll see below. That's not too shabby. If you are a discretionary stock picker the NAPS is a good benchmark to try to beat each year to see if your selections and trading add additional value.

The NAPS archives go into lots of detail about the annual portfolio selection process and the theory behind it and there are a few older videos on our Youtube channel which I really must update. For the first few years I kept a very simple selection process and the performance was fantastic. I should have realised "if it ain't broke don't fix it" but I started fiddling with the diversification rules and made the portfolio more and more constrained. Rather than just diversifying across sectors, I introduced diversification across size groups and risk ratings. This had the negative impact of driving down the average ranking of the shares held, and thus the performance suffered for a couple of years.

Nonetheless the 5 year performance was a 100% return. Not too shabby. At the start of 2020 I realised I needed to unshackle the portfolio and set it free. So that's what I did. I removed all the extra diversification rules and baked in more focus on momentum... it was…

Unlock the rest of this Article in 15 seconds

or Unlock with your email

Already have an account?
Login here