[This is a fairly long piece.  If you do want to print and read offline I have prepared a PDF version that is linked to at the bottom of this piece]


Introduction

It's quite surprising that it's already been 5 years since the start of the NAPS Portfolio. I remember being in Australia at the time of its inception and, as ever, feeling really anxious that markets were a bit hairy and had already had a good run. Well now, 5 years later, they've continued to have a good run and I'm still feeling anxious. I guess anxiety is a good thing - bull markets are built on walls of worry after all.

Well I'm delighted to report that the NAPS Portfolio has doubled over this time period - a 102% return at the close, which is 15% annualised. To be fair, I haven't factored in transaction costs, but the average dividend yield over this period has been about 3.5% which more than covers stamp duty (<0.5%), bid-ask spreads (<2%) and platform & dealing fees.

It's been a bit of a bumpy ride over the last couple of years, and I'll go into this in a bit more detail shortly, but you can see the five year performance of the NAPS (in blue) versus the FTSE All Share Index (in grey) which managed only 20% over the same time period.

The NAPS have quintupled the return of the FTSE All Share in only an hour's work per year.


Explainer

What are the NAPS?

For anyone new to the site you may not be familiar with the NAPS. As I only have the time to write rarely these days, I feel a brief explainer is due.

The NAPS is a "No-Admin-Portfolio-System". It selects the top 2 highest StockRank stocks from each of 10 sectors in the stock market, holds them for a year, then rebalances and does it all over again.

That's the essence. It's pretty simple and takes only a short period of time to put together. Over the years I got a bit carried away and made the process more complicated, but these tweaks have been to no added gain. At its heart this is a systematic process that's designed to remove any personal bias around share selection, and thus help reduce emotional attachment.

The NAPS piggy-backs a non-obvious phenomenon in the stock…

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