Want to Beat the Market? Here Are 6 Strategies Top Investors Use
"Alpha generation is the primary objective of investment management." — Widely held industry principle
“How much has your portfolio returned?”
That is usually the first question people ask when evaluating a mutual fund, a PMS strategy, or a financial advisor.
And it is a fair one — performance matters.
But the more useful question is:
“Where did that return come from?”
Was it the market? Was it luck? Or was it a set of smart, repeatable, controllable decisions that added up to meaningful Alpha?
In this article, we will not talk about just beating the market.
We will talk about something far more powerful: Beating your own default outcome — by doing six things better.
Before We Begin: The Power of Alpha, Explained with One Table
Say you invest ₹50,000 per month for 30 years.
That 2% Alpha — between 10% and 12% — is worth ₹6.25 crore.
This is the power of compounding a slightly better return over a long time.
Now here is the real question: Can you generate that extra 1–2% Alpha not through luck or timing, but through conscious choices?
The answer is yes. Here are the six sources of Alpha that matter most — and how to capture them.
Alpha #1: Lower Costs
This is the most predictable Alpha you can generate. You do not need a forecast. You just need to choose smartly.
Let us take two funds in the same category — large-cap equity.
The fund returns may look similar, but the cost difference is real.
Over a 25–30 year investment horizon, a 1% difference in cost can result in ₹2–3 crore of lost Alpha for a typical SIP investor.
This cost Alpha comes from:
- Choosing direct plans over regular ones
- Avoiding high-cost, bundled insurance products
- Minimizing portfolio churn (which increases tax and transaction drag)
- Being aware of exit loads and hidden fees
Low cost is not low effort. It is high impact.
Alpha #2: Better Asset Allocation
Most Indian investors are heavily allocated to real estate and fixed income.
- 70–80% of total net worth is often in illiquid or low-growth assets
- Equity exposure remains less than 15–20%, especially for older investors
Let us see what this means in numbers:
That 1.8% improvement in return is pure Asset Allocation Alpha.
It is not about picking the best fund. It is about giving growth assets enough weight in your portfolio — especially for long-term goals.
Asset allocation Alpha also shows up in:
- Having liquidity when needed (to avoid selling equity in a downturn)
- Matching investment horizon with asset risk
- Using debt, gold, or cash as rebalancing tools
Your portfolio’s return is often decided before a single fund is picked.
Alpha #3: Better Product Selection
Within each asset class, the products you choose matter. A lot.
Here is a look at Value Research Online’s data (as of July 2024):
That is a 4.7% spread — within the same category.
So even if your asset allocation is right, picking underperforming funds can erode return.
Product Alpha comes from:
- Choosing consistent performers with stable mandates
- Understanding fund strategy and style
- Avoiding unnecessary NFOs or theme-based funds
- Comparing XIRRs across timeframes, not just short-term rankings
To explore this further, visit: 👉 Value Research Best Funds List 👉 AdvisorKhoj Fund Selector
A good product inside the right asset class = invisible Alpha that builds silently over time.
Alpha #4: Better Timing (Yes, Market Timing)
Most advisors say: don’t time the market. We say: at least try not to get in at the worst time.
Let us take a simple historical example:
- Investor A invested ₹10 lakh in Nifty in December 2007 (market peak)
- Investor B invested ₹10 lakh in June 2008, post-correction
Both held for 15 years.
That is ₹15.5 lakh in Timing Alpha — just by waiting 6 months.
No one gets it perfect. But you can:
- Avoid investing large sums when valuations are overheated
- Deploy more during deep corrections (March 2020, Covid crash)
- Use basic valuation metrics or SIP step-ups to time entries
Even partial success here adds 1–2% long-term Alpha.
Market timing is hard. But valuation awareness is very doable.
Alpha #5: Better Behaviour
According to the DALBAR 2023 Quantitative Analysis of Investor Behavior:
Why the gap?
Because investors switch. Panic. Pause SIPs. Exit at lows. Re-enter at highs.
In India, too, redemptions peak when markets fall — and fresh inflows peak after rallies.
Behaviour Alpha comes from:
- Staying invested during down markets
- Continuing SIPs through volatility
- Avoiding return-chasing switches
- Focusing on process, not predictions
But behaviour Alpha is also about saving and investing enough.
You can’t compound what you didn’t invest.
₹1.5 lakh/month at 8% beats ₹50,000/month at 15%. Because in the end, you spend corpus — not CAGR.
Alpha #6: Better Risk Management
What most people forget is this:
- A 10% loss needs an 11% gain to recover
- A 33% loss needs a 50% gain
- A 50% loss needs to double your money just to get back to zero
Risk management is not about fear. It is about longevity of capital.
Especially for those in retirement, early drawdowns can permanently damage the sustainability of income.
Risk Management Alpha includes:
- Diversification across assets
- Managing sequence risk in retirement
- Keeping emergency funds and near-term goal money safe
- Avoiding over-concentration in single stocks, sectors, or real estate
It protects return by avoiding unrecoverable damage.
The best way to grow wealth is to not lose it too fast.
Closing Thought: Real Alpha Is About Control
Not everything is in your hands. But these six things — cost, allocation, product, timing, behaviour, and risk — are.
And together, they can add 1% to 3% extra return per year — which can change your financial future.
You do not have to get all six right. Even 2–3 done well can add crores to your long-term outcomes.
Final Word
Alpha is not just about beating the market. It is about building the future you want — faster, safer, and more confidently.
Let others chase returns. You focus on the decisions that actually move the needle.
That is the Alpha that truly matters.