Backtested Lazy Strategy—It Destroyed the Index!
Updated: Nov 3
Backtested Lazy Strategy—It Destroyed the Index! provides a useful framework for turning market observations into repeatable trading decisions. This updated guide preserves the original Financial Wisdom material while adding clearer rules, evidence checks and risk controls.
Backtested Lazy Strategy—It Destroyed The Index!: In This Guide
Key lessons and practical rules
The original Financial Wisdom guide and media
Evidence, limitations and risk controls
Frequently asked questions
Related guides and authoritative sources
Key Takeaways
Define the setup, trigger and invalidation level before entering.
Confirm signals with price, volume and the wider market context.
Test complete rules across different regimes and include trading costs.
Size every trade so one failed setup cannot materially damage the account.
Original Financial Wisdom Guide
Stockopedia’s NAPS (Smart Ranking System): A Revolutionary Approach to Investing
What if I told you there's a stock-picking strategy so simple that it takes less than one hour per year to manage? This system has beaten every single UK fund manager over the past decade. Imagine turning £100,000 into over £340,000 while the FTSE All-Share only managed £127,000. In this video, we will explore a system so effective that it has outperformed the S&P 500, a growth market index, using only value-driven UK stocks. The system is Stockopedia's NAPS portfolio.
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The NAPS portfolio is something that challenges everything you think you know about successful investing. While most investors spend hours researching companies, reading annual reports, and following market news, there's a mechanical system quietly crushing the competition. Over ten years, the NAPS portfolio has compounded at 13% annually. The best part? Anyone can replicate it. By the end of this video, you'll understand exactly how this system works and why rules-based investing might be the key to building long-term wealth in the UK market.
What Makes NAPS Different?
Let me start with a story that illustrates why most investors fail. Picture this: you buy a stock because of a compelling story. You watch it double in value and hold on because you "believe in the company." Sound familiar? The NAPS system would have sold that stock after exactly one year, regardless of the narrative. Here's the shocking part: of the top ten biggest NAPS winners over the decade, eight either crashed or went sideways after being sold. Only two continued to rise significantly.
This illustrates the fundamental difference between emotional, story-driven investing and systematic, rules-based investing. The NAPS portfolio doesn’t care about your feelings or market sentiment. It follows a simple set of rules that have been proven effective over decades.
Key Principles Behind NAPS
The NAPS strategy is built on Stockopedia's "3D Framework." This framework consists of three dimensions essential for separating winning portfolios from losing ones:
1. Drivers
This focuses on consistently picking high-potential shares. The system uses Stockopedia's proprietary StockRank, which combines quality, value, and momentum factors. These metrics aren’t random – they are the three most powerful return drivers, proven by academic research over the past century.
Practical Checkpoint
Define the setup, entry and invalidation level before acting.
Compare the potential payoff with risk-reward planning.
Set the trade size using consistent position-sizing rules.
2. Diversity
Diversity helps reduce risk while improving returns. Instead of betting everything on a few stocks, NAPS spreads risk across all ten market sectors. This approach ensures you capture the next big winner, wherever it may emerge.
3. Discipline
Discipline is crucial for maintaining your edge over time. Many investors start with good intentions but let emotions drive their decisions. The NAPS strategy eliminates emotional biases entirely.
Understanding the NAPS Methodology
Implementing the NAPS strategy is simple. You can do it in minutes:
Sort the UK stock market: Order by StockRank in descending order.
Exclude small shares: Remove stocks with market caps below £20 million for better liquidity.
Select top stocks: Choose the top two stocks from each of the ten market sectors for diversification.
Buy and hold: Invest in this list and hold for exactly one year.
Repeat: After one year, sell everything and start the process again.
That's it. No complex analysis, no reading annual reports, and no following CEO interviews. The entire process takes less than an hour annually.
But why does this mechanical approach work? The answer lies in human psychology. We tend to make investing mistakes by falling in love with stories, panicking during crashes, chasing hot sectors, and holding onto losers too long.
The NAPS system eliminates these biases. It doesn't care if a company has an exciting new product or if its CEO gave a great interview. It prioritizes data, and data doesn’t lie.
Impact of NAPS on Returns
Consider this: the system picked Games Workshop when it was unfashionable, rode Jet2's incredible run, and captured IQE's 261% gain in 2017. But it also sold stocks like Petropavlovsk and Frontier Developments before they ducked in value by 96% and 94% respectively. A human investor, attached to these "winning" stories, might have held onto them and watched their gains evaporate.
The results of the NAPS portfolio are staggering: a 241% total return over the past decade, compounding at 13% annually. If you had invested £100,000 in 2015, it would be worth over £340,000 today.
Evidence Check
Is the sample broad enough to include difficult markets?
Do the results include spreads, fees, slippage and failed signals?
Could hindsight, survivorship or selective examples explain the result?
This performance was achieved during a tumultuous decade for UK stocks, featuring Brexit uncertainty and a global pandemic. In contrast, the FTSE All Share managed just 27% over the same period. Remarkably, the NAPS portfolio outperformed the S&P 500's return of 193% using only UK stocks.
The Discipline of Investing
Now, let's address the psychological aspect of following a systematic investment approach. It's not easy. The NAPS portfolio has spent seven of the last ten years in drawdown, meaning it was beneath its previous high. During the March 2020 pandemic crash, five years of gains were lost within a week.
Discipline is crucial here. If you check your portfolio daily, you’ll likely be disappointed half the time. The NAPS portfolio rose on only 53% of trading days. However, if you check just once a year, your chances of seeing a gain jump to 80%. That's 364 fewer opportunities to make emotional decisions that could derail your returns.
Conclusion: The Power of Simplicity
The NAPS portfolio proves a fundamental truth: simple, systematic approaches consistently beat complex, discretionary ones. Over the past decade, this one-hour-per-year strategy has outperformed every UK fund manager and major indices while topping the S&P 500.
The three pillars – proven return drivers, sector diversity, and maintaining discipline through systematic rebalancing – create a framework any investor can follow. You don’t need to be a financial genius or have insider information. You need the discipline to follow a proven system and patience to let compounding work.
In a world obsessed with complexity, the most radical approach may just be simplicity. For those seeking long-term wealth creation, NAPS offers a compelling alternative to the stress and under performance of traditional stock picking.
If you’re interested in a Stockopedia subscription, which grants access to StockRank, the foundation of the NAPS strategy, you can get it at a discount through the link in the description below.
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Another Factor investing approach known as the Piotroski F Score is also worth considering. The results are quite staggering.
Full Video:
I use factor scoring within our own strategy which has been built into our bespoke software. We look for Quality stocks, with momentum, breaking out to new highs. A hybrid approach of both Fundamentals and Technical aspects:
Related Reading
Inside the Financial Wisdom Weekly Consolidation Breakout Framework
Risk Management in Trading: The Foundation of Long-Term Profitability
Published by FinancialWisdomTV.com Rules-Based Investing | Quality & Momentum | Probability-Driven Execution
Practical Limitations
Historical examples, interviews, backtests and indicator results are educational illustrations rather than forecasts. Outcomes depend on the market, timeframe, data, transaction costs, financing, taxes and execution assumptions. Test complete rules across varied conditions and define the maximum acceptable account risk before taking a position.
Put This Into Practice
These ideas become more useful when selection, entry, stop placement, position sizing and trade management form one repeatable process. The Financial Wisdom Trading Blueprint connects those decisions in a practical weekly framework.
Frequently Asked Questions
Does this strategy guarantee profitable trades?
No. It provides a framework with uncertain outcomes and must be tested with complete entry, exit and risk rules.
What should be defined before an entry?
Specify the setup, trigger, invalidation level, position size and conditions for managing or exiting the trade.
Further Reading
References and Further Reading
Educational information only. Trading and investing involve risk, including the possible loss of capital. Examples are illustrative, not guarantees of future performance, and nothing in this article is personalised financial advice.
About the Author
Written by Gareth, MBA
Gareth, founder of Financial Wisdom, has more than 30 years of personal trading experience. He competes in the United States Investing Championship, creates award-winning trading content and has been featured in Technical Analysis of Stocks & Commodities.
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