GENESIS OF RULE-BASED INVESTING
The genesis of rule-based investing can be traced back to the early days of modern finance theory, when pioneers such as Benjamin Graham and David Dodd began to develop a systematic approach to investing based on fundamental analysis. Graham and Dodd believed that by analyzing a company's financial statements and other key metrics, investors could identify stocks that were undervalued by the market and had the potential for long-term growth.
Over time, other factors such as momentum, quality, and size were identified as important drivers of stock returns. Momentum investing, for example, involves buying stocks that have performed well in the recent past in the expectation that they will continue to perform well in the future. Quality investing focuses on companies with strong balance sheets, stable earnings growth, and other characteristics that are associated with long-term success.
In recent years, advances in technology have made it easier than ever for investors to access large amounts of data and build sophisticated models based on these factors. This has led to a proliferation of rule-based investment strategies that seek to exploit these factors in order to generate superior returns.
Today, rule-based investing is used by a wide range of investors, from individual retail investors to large institutional asset managers. It is particularly popular among investors who are looking for a systematic approach to investing that can help them achieve their financial goals over the long term.
Overall, the evolution of rule-based investing has been driven by a combination of advances in technology and a growing understanding of the factors that drive stock returns. As these trends continue to evolve, it is likely that we will see even more sophisticated rule-based investment strategies emerge in the years ahead.
NJ Asset Management is leading this endeavour in India with our "Built on Rules" ideology as a guiding principle that underpins our investment philosophy and approach. The main core of rule-based investing at NJ is our focus on high-quality data and rigorous analysis by a highly experienced team. We have built a repository of daily factor scores for over 1,500 companies spanning more than 20 years. This database, combined with our in-house data analytics capabilities, provides the foundation for our factor-based strategies across our portfolio management and mutual fund offerings. At NJ Asset Management, rule-based investing serves as a cornerstone of our investment philosophy, ensuring a systematic and disciplined approach to investment management that seeks to deliver value to our investors over the long term.