Making smalltalk with Alok Jain

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Alok Jain, a SEBI Registered Investment Advisor, is the founder of WeekendInvesting.com, that focuses exclusively on mechanical momentum based investment strategies. After 2 decades of developing his trading style & methodology, Alok first took the plunge in 2016 by announcing and maintaining his strategy in the public domain on Twitter, returning 54.02% on his own capital within 1 year. In 2017, after numerous requests from his old acquaintances and the new Twitterati following, Alok launched WeekendInvesting.com to make his strategies formally available to everyone.

In a candid conversation with the smallcase team, Alok talks about his journey from an engineering student at IIT-Delhi to being an investment advisor, how he developed his investment style, his 2 new strategies with smallcases, and all things markets:

How did you get into the markets space?
I had my first brush with finance while doing my MBA at the University of Maryland, where I even took part and did well in a stock investing competition. Understandably, this was based on fundamental theory rather than technical analysis. But my move into the stock market was rather unplanned and happened due to 2 main factors – the first was my decision to come back from the US to live with my family in India, and the second was when a career opportunity presented itself to take a brokerage membership with the then recently established National Stock Exchange

While most of the investing world tries to emulate Warren Buffett & his style of long-term investing, how did you get into the more technical route?
The brokerage business was a small setup that required hands-on operation, thus enabling me to be very close to the market action where I was updated with market developments practically on a live basis. When you’re so close to it at all times, it tends to make you think short-term rather than long-term. Over the years, this made me take a more short-term view rather than a long-term view of the market and I started merging what I’d learnt about investment theory – like taking a portfolio approach, not leveraging, sizing positions – with what I was seeing and learning about market technicals.

How did you settle on a momentum-based approach?
I was quite influenced by the likes of Turtle Traders, Richard Dennis, and Michael Covel who were trend followers. I also found this to be more intuitive than other forms of pattern reading, which in turn gave more clarity in terms of decision-making & allowed me to design systematic strategies that had no room for ambiguity. The best thing is that at every step, your views either get reconfirmed or you get out. The exit point is the weak-link for most investors, whether they are fundamental or technical – however, price is an indicator that leads other signals/factors and hence a rule-based strategy that is based on price momentum leads to better exit points.

What’s unique about these 2 new strategies you’ve launched with smallcase, and how are they different from your existing strategies?
The two newly launched strategies are similar to existing strategies in their principle philosophy & style – the difference is mainly in the stock universe they address and the timeframe. The Mi_LT_CNX200 smallcase focuses on Nifty-200 stocks and targeted towards investors who want lower volatility and perhaps even lower returns, but with higher quality stocks in their portfolio.

The Mi_MT_Allcap smallcase looks at the entire Nifty universe, has a medium-term focus, and is more return-seeking and riskier in its objective. Compared to the existing ones, these strategies are more concentrated with 20 stocks, and are also more affordable since these strategies trade only on highly liquid stocks and are designed for a larger audience (the existing ones aren’t in order to reduce slippage & monitoring costs).

How has the retail investor market evolved since you entered it in the early 90s?
I believe it has matured a lot in the years. Even as recently as 2010, it was basically the foreign fund flows that dominated the action in the market, but now there are sizeable domestic counters that have come in to stabilise the market. The mutual fund industry has become a big player in the market, especially in the last few years – which has resulted in the market becoming comparatively less volatile in general.

Compared to earlier times, today we see fewer instances where stocks are constantly hitting their circuit-breakers. Although I’d say that market depth is still lacking, we’ve definitely come a long way. Most market participants have also become more mature now, having witnessed at least one boom/bust cycle, and the element of speculation has also reduced drastically due to positive regulatory changes. Reduction in transaction charges has also significantly helped the retail market.

What is the one thing that you’d like to see improve in the industry?
We’re still one of the highest taxed investment markets from a global perspective, so would be good to see this cost reduce.

What’s your outlook for stock markets in 2019?
This will be another difficult year for the markets, and regardless of the political dispensation, I believe the second half of 2019 will be better than the first half for the markets.

You are very active on Twitter – what do you make of it?
I think Twitter as a knowledge platform is a goldmine and still extremely underrated. Has been very beneficial for small businesses like mine, not just in terms of reaching out to new/existing clients and business marketing, but also with regards to connecting with like-minded individuals and sharing ideas and learning new things

What’s your message for budding investors?
Start to save and invest early, targeting at least 30% of your income. Create a structure around your investing & saving habits. It took me many decades to understand the power of compounding, so hence this will be the main advice I’d offer.

What would be the minimum amount that one should start trading or investing with?
Whatever you can and have available, start with it.

What are your views on smallcases?
It’s an especially wonderful platform that has democratized investing and portfolio management. For retail investors who can’t go for structured products or Portfolio Management Services (which have a minimum ticket-size of 25 lakhs), smallcases are a very effective option to take exposure to high-quality strategies at reasonable costs.

What’s the one thing that you believe in, that others around you disagree with?
My belief in price is paramount. A lot of people either ignore price or price trends or dismiss it as irrelevant information, but I believe it tells a lot more about a stock and what will happen than anything else. Which is why I believe in the Gujarati saying “Bhav Bhagwan Che” – price is God!

“My belief in price is paramount

Bhav Bhagwan Che”

This story is a first in a series of conversations with smallcase managers, who create & share smallcases using the Publisher Platform. Read more about the Publisher Platform here

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Vikas Bardia @https://twitter.com/vikasbardia

Investor + startup guy who loves to chase rooftop & sunset views. Go long and prosper! 🖖🏼

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