ORMI UK 20 & UK Worst 20

Mukul Pal · March 11, 2013

Q: What is the difference between ORMI UK 20 and ORMI UK Worst 20?
A: The UK 20 components are selected from 350 stocks while UK Worst 20 are selected from UK top 100.

Q: How does changing the group define the ORMI portfolio index?
A: Changing the universe gives character to the underlying ORMI Portfolio Index. For example because UK worst 20 is selected from FTSE 100, the ORMI UK Worst 20 has more blue chip companies compared to ORMI UK 20 where the stock components are selected from FTSE 350 stocks.

Q: What are the other differences between the two ORMI UK indices?
A: ORMI UK 20 is re-balanced every two weeks, while ORMI UK Worst 20 is rebalanced every quarter.

Q: Does re-balancing change the risk profile of the two respective ORMI indices?
A: Yes. Rebalancing every quarter makes ORMI UK Worst 20 more passive than ORMI UK 20.

Q: Does more passive means more risky?
A: Orpheus Indices are generally designed to be passive. Hence we are comparing the less passive (UK 20) from more passive (UK Worst 20). We don’t associate passive investing with more risk, rather will less risk. We think active investing leads to more investing errors as stock performance generally persists for a few years. Getting out too early could be a bigger risk in a secular uptrend compared to getting in too early. Though between the two i.e. UK 20 and UK Worst 20, the former has delivered more returns, the UK Worst 20 offers more investing convenience. Moreover, the higher returns on UK 20 are also because the components of the respective index are smaller in capitalization and higher in performance volatility.

ORMI UK 20 Current Portfolio