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Simple momentum investing has beaten the market. In the first quarter, our momentum portfolio (an equal-weighted basket of the 20 best-performing stocks in the previous quarter) outperformed the FTSE 350 by 6.3 percentage points. In the last 12 months, this portfolio has returned 7.4 per cent. Not only is this 14.6 percentage points better than the FTSE 350 has managed, it is better than all but one fund out of 436 in Trustnet's database of all companies unit trusts.
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Momentum isn't the only no-thought strategy to have paid off. Our mega-cap portfolio (the 20 biggest stocks) has beaten the FTSE 350 by 8.3 percentage points in the past 12 months. Only nine unit trusts in the all companies sector have done better.
| No-thought portfolios' returns | ||
| First quarter | Last 12 months | |
| FTSE 350 | -9.8 | -7.2 |
| Mega caps | -8.2 | 1.1 |
| Small caps | -9.0 | -23.7 |
| Value | -6.4 | -29.1 |
| Losers | -13.7 | -39.3 |
| High beta | -11.3 | -14.1 |
| Momentum | -3.5 | 7.4 |
| Idiosyncratic risk | -9.1 | -23.2 |
| Low risk | -4.8 | -7.8 |
However, other strategies have done poorly. Small stocks, value stocks and loser stocks (the 20 worst performers in the previous three years) have all had a terrible 12 months, although value has perked up in recent weeks.
It's also been a mixed time for our low-risk portfolio. Although this has outperformed so far this year - as you'd expect - it has actually underperformed in the past 12 months. This is because it held real estate stocks in the summer, which were badly hit by the credit crunch - which shows that apparently low-risk stocks can suddenly turn risky.
*Descriptions of our portfolios, along with their latest constituents, are in this spreadsheet.
For more updates on the markets, go to http://www.investorschronicle.co.uk/MarketsAndSectors/
To read other articles written by IC's columnist Chris Dillow, click here.
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-IC-2.1.3g-prod - 17/03/2010 18:13:09 - ben.wheeler
