Nifty 200 momentum 30 index

Buy and Hold Vs Riding a Trend.

UTI recently launched a fund mimicking this Index Fund. Nifty 200 momentum 30 index. The index data is available from 2005. So we thought lets see if we can run an ATR based trend system on it.

Like always , lets see what a plain vanilla buy and hold investor would have achieved.

Starting capital: 200000

Ending capital: 3669990

Net profit: 3469990

CAGR: 19.39%

MAX DD -66.45%

CAR/MaxDD: 0.29

This is how it appears month on month.

Now Lets see if our Friendly Super trend can improve this or not.

Starting capital: 200000

Ending capital: 2967088

Net profit: 2767088

CAGR: 17.86%

MAX DD -22.29%

CAR/MaxDD: 0.80

and here is the month on profit/loss table

Conclusion

So as you can see, adding a trend filter has actually reduced the returns from 19% CAGR to 17% cagr. However the filter has more than done its job. It has reduced the drawdown from unbearable 66% to within the pain thereshold (hopefully) of 22%

A total of 22 trades were taken in this period of 16 years. 77% of these trades were profitable. Super trend settings were optimized however equity curve remains positive even if you change settings a tad up or down.

If we do a similar exercise with Dual momentum, result should be attractive as well. It may not enhance returns, but will definitely cut the drawdowns ensuring you stay in the game for long.

Tax implications would obviously be there.

Comments are welcome.