25% CAGR for 12 Years... Here's Exactly How He Did it | Rakesh Pujara

Finance-focused summary of the subtitles

What the strategy is (Momentum + rule-based, technical-only)

• The presenter describes a rule-driven momentum investing approach built around the idea: “whatever is in momentum moves forward” (i.e., price trend continues in the same direction).
• They emphasize it is not fundamental-based after the stock universe is chosen:
  • Fundamental filtering is described as “baked in” via index membership.
• Entries and exits are driven by technical indicators on weekly charts.

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Key performance claims / results & risk metrics (explicit numbers)

TVS Motor example

• Price: ₹39 (2010) → ~₹4000 today
• Framing: “happened 1000 times” (used to illustrate riding winners)

Backtest “winners/losers” outcomes

• Average winner: ~+150%
• Average loser: ~-25% to -30%
• Implied risk-reward: ~1:5 to 1:6
• Claimed strike rate: ~52% (near coin-flip, but with asymmetric payoffs)
• Another (unclear wording) stat: first 95% were average winners and 16% were average losers (presented as distribution/edge evidence)

Model portfolio / live test claims

• Model portfolio return: >25%
  • Cited across contexts like “last 3–4 years” and “last 2 years”
• Backtest: ~27–28% return with around ~25% drawdown
• Timeframe:
  • “Test done for 12 years”
  • Backtest starting 2011
  • Live starting 2023
• Live performance:
  • Since March 2023 described as evidence that live results are close to the backtest
  • Live test duration cited as ~40 months

Market exposure / drawdown protection

• Target exposure: out of the market ~37% of the time (in-market ~63%)
• Crisis comparisons:
  • During COVID, claim: mostly out by end of February
  • During 2018–19 NBFC crisis, similarly described as mostly out
• Drawdown comparison:
  • Index drawdown: ~35%
  • Strategy drawdown: ~25%

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Universe selection / stock pool rules (filters)

Starting universe

• NSE stocks:
  • ~2000 stocks on NSE
  • Presenter states they do not look at BSE-only penny/low-liquidity issues.
• Further universe constraint:
  • Most portfolios are built around index membership:
    • Nifty / NSE indices
    • Specifically “NSE 500” or a total market index of 750 stocks (wording slightly inconsistent)
• Rule described:
  • If a stock is part of an index, that serves as an automatic fundamental filter.
  • They avoid fundamental analysis and rely on technical momentum signals.

Portfolio size

• Target portfolio size: 25 stocks
  • Reason: diversification beyond ~20–25 doesn’t add much and can increase volatility.
• They also state:
  • You don’t need 500 stocks; you have 25 stocks available.

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Entry methodology (step-by-step framework)

Indicators & chart timeframe

• Uses Bollinger Bands on a weekly chart (not daily).
• Standard Bollinger reference discussed, then optimized:
  • Original: 20-week MA, ± 2 standard deviations
  • Optimized (used since 2016):
    • Middle band: 55-week moving average
    • Upper band: 3.7 standard deviations
  • They state they don’t use the lower band because they are focused on upside “extra momentum” conditions.

Scan timing & execution cadence

• Scan timing:
  • After Friday close
• Execution:
  • Trades placed Monday morning
• Cadence statement:
  • “There is nothing to do from Monday to Friday.”

Signal logic (as described)

• A new position is created when the stock meets the Bollinger/momentum condition.
  • Framing: they enter when the stock is outside the upper band (exact condition wording is implied).
• They also allow:
  • Enter on the new signal, or
  • Use backtested “old signals” to enter current positions at the current price.

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Position sizing / allocation rules

• Allocation per stock:
  • ₹1 lakh portfolio → ₹4000 per stock
  • That equals 4% each
• With 25 stocks, the portfolio reaches 100% equity allocation when fully populated.
• Rebalancing policy (weight discipline):
  • They stress: “4 taka means 4 taka for life time”
  • Weight increases are allowed because winners rise by price action, not because of active rebalancing.

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Exit / risk management rules (explicit)

They describe three exit conditions, with the idea of:

• Initial stop loss
• Then trailing stop loss
• Plus an ATR/volatility-based override to prevent overstaying if trailing logic lags during sudden bad news

Exit condition 1: Initial stop loss (time-based weekly close)

• Example:
  • If bought at ₹100, and by the subsequent Friday close the price closes below 80, then sell on Monday.
• Described as a 20% initial stop loss.

Exit condition 2: Trailing stop loss (MA-based)

• Hold positions until the stock:
  • Closes below its 34-week moving average

Exit condition 3: ATR-based volatility stop

• If news shocks cause price to fall faster than the MA trail allows:
  • Use ATR as a volatility filter.
• ATR settings:
  • ATR standard: 14 periods
  • Optimized multiplier: 1.8 (“14 and 1.8”)
• Rule:
  • If any of the three exit conditions triggers first, you exit.

Core “avoid mistakes” logic

• They argue investors commonly:
  • stand in losses too long
  • book profits too early
• The framework aims to:
  • cut losers
  • ride winners

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Handling fewer than 25 qualifying stocks (deployment rule)

• If fewer signals qualify (e.g., 15 instead of 25):
  • They say you do not increase allocation to those 15 by violating the 4% per-stock rule.
• Remaining unallocated portion (~60%) can be invested in:
  • liquid
  • gold
  • silver (user preference)
• This supports the claim that the strategy can be out of the market ~37%.

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Relative strength “gunpowder” / multi-layer protection (when using reserves)

• They note momentum strategies can be weak when market leadership changes.
• Secondary idea: add relative strength (RS):
  • Identify sectors outperforming the market
  • Then choose stocks outperforming within those sectors
• Purpose:
  • Used in reserve / “gunpowder” allocation so the portfolio isn’t fully dependent on the main momentum equity sleeve.
• Example company name given:
  • Naveen Fluorine (spelling inconsistent; likely “Navin Fluorine”)
  • Presented as an example where sector strength drove large gains.

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Performance interpretation / trade statistics claims

Trade/churn statistics

• Strike rate: 52%
• Trades:
  • 375 trades over 15 years
• Definition:
  • “One trade is equal to 4%” (selling/replacing one 4% sleeve)
• They mention that rebalancing can cause round trips / higher effective churn.

Holding duration stats (from winners/losers)

• Average winner holding duration: 86 weeks (~1.5–2 years)
• Average loser holding duration: 28 weeks (~< 6 months)
• Claimed implication:
  • more long-term gains and shorter-term losses (presented as tax-efficient)
  • No country-specific tax rules are cited.

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Disclosures / disclaimers mentioned

• Explicit disclaimer:
  • “whatever we mention here is not a buy or sell recommendation. We are speaking for example.”

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Instruments / tickers / assets explicitly mentioned

Stocks / companies

• TVS Motor
  • Example price: ₹39 → ~₹4000
• MTA Tech
  • Buy signal cited at ₹2200, grew to 8500 in “three or four months”
• Naveen Fluorine / Navin Fluorine
  • Used as an RS “gunpowder” example
• A “Bank” mentioned (name distorted; appears like “Binjjar Bank”, not confidently identifiable)

Indices / universe benchmarks

• NSE 500
• Total market index of 750 stocks
• Nifty 50 Momentum 20 (mentioned as an existing index concept)

Indicators / instruments

• Bollinger Bands
• Moving averages: 55-week MA, 34-week MA, 20-week MA (reference)
• ATR: 14-period, multiplier 1.8
• Defensive / parked assets: G-Sec, liquid, gold, silver, cash

Macro/market regimes

• COVID period
• 2018–19 NBFC crisis

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Strategy “framework” checklist (condensed)

• Universe selection
  • Use NSE index constituents (e.g., NSE 500 / total market index)
  • Avoid BSE-only low-liquidity/penny stocks
• Entry
  • Weekly scan after Friday close
  • Enter Monday morning when price is beyond Bollinger upper band with:
    • 55-week MA center
    • upper band = 3.7 standard deviations
  • Allow entry using new signal or “old backtest signal” at current price
• Position sizing
  • 4% per stock (e.g., ₹4000 per ₹1 lakh)
  • Target 25 stocks
  • Do not increase allocation if fewer qualify
• Exit
  • Sell on next Monday if:
    1. 20% initial stop via Friday close (e.g., ₹100 → close < ₹80)
    2. Friday close below 34-week moving average
    3. ATR-based condition:
       • ATR(14) with multiplier 1.8
• Rebalancing policy
  • Avoid regular rebalancing; rely on rule-based exits/entries
  • Rebalance only when required by signals/extreme conditions
• Reserve / “gunpowder” overlay
  • Use RS to allocate to outperforming sectors/stocks when equity momentum underperforms
  • When out of market: use defensive assets (liquid/gold/silver/G-sec)

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Presenters / sources mentioned

• Rakesh Pujara — Founder, Compound Wealth Advisors (CWA)
• Interviewer / host: Kunal
• Mentioned external researcher/trader:
  • Nihatach / Nikach (Australian trader; name partially garbled)
• Platform mentioned:
  • Get Prosper Club
• Organization naming (varies in subtitles):
  • Compound Wealth Advisors (CWA) / “Compound Wise Advisors”