How It Works
Momentum investing buys what is already working and sells what has stopped working. The edge is not prediction — it is discipline. Every decision below is made by rule, on a schedule, without discretion.
- 01
Universe
We start with liquid, listed Indian equities of sufficient size and traded volume. Micro-caps and illiquid counters are excluded so positions can be entered and exited without moving the price.
- 02
Ranking
Each month every eligible stock is scored on medium-term price momentum, adjusted for volatility so that a smooth uptrend ranks above an erratic one with the same raw return.
- 03
Selection
The top-ranked names form the portfolio, capped at 20 positions with sector limits so the book never becomes a single-theme bet.
- 04
Position Sizing
Positions are sized approximately equally at entry. We do not average down; a weakening position is exited by rule rather than reinforced by hope.
- 05
Monthly Rebalance
Once a month the ranking is recomputed. Names that fall out of the qualifying band are sold and replaced by the highest-ranked candidates. Between rebalances we do nothing.
- 06
Exits
A holding leaves the portfolio when its rank deteriorates, when a trailing stop is breached, or when the strategy moves defensive during broad market weakness.
Backtested results are hypothetical, exclude slippage and taxes, and are not a promise of future returns.
- Sharp drawdowns. Momentum works over years and hurts over months. Double-digit drawdowns are normal, not a malfunction.
- Reversals. When market leadership rotates abruptly, the portfolio sells near the lows of the old leaders and buys the new ones late.
- Turnover. Monthly rebalancing generates trading costs and short-term capital gains tax.
- Concentration. Twenty positions is focused. A single blow-up is felt.
Legacy Wealth publishes this strategy for research and education. Nothing here is investment advice. Please do your own research, and invest only what you can hold through a bad year.