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Beating the Market

Are you a wealthy person in search of expert portfolio management? Don't tell anybody (especially the SEC), but... we know how to beat the market.

Our past results speak for themselves:

 

Past performance does not guarantee future results!            

 

Okay, we aren't really investment geniuses (honest). What you're seeing here is luck being marketed as skill. We created eight simulated portfolios and then used a random process to "invest" them for twenty years. They all got the same expected return rate and standard deviation (hence the same expected outcome) as the Total Stock Market index, but by sheer luck there are almost always a few big winners. So we picked whichever portfolio that happened to do best, gave it a snazzy name, and copied it up to the box above.

 

Eight Random Outcomes:
$ $ $ $
$ $ $ $
Market Index: $

Expected Annual Return: %
Standard Deviation: %
Years:

 

This sounds like a joke, but investment firms have really done it, creating a handful of private "incubator portfolios" and then just riding the dumb luck train until a few clear winners emerged; then they aggressively marketed the winners, and quietly retired the losers.

("Past performance does not guarantee future results" - and how.)

 

Article Contents
Market Abnormality
Significant Outliers
Ups and Downs
Long Term Risk
Momentum & Reversion
Crashes & Recoveries
Retirement Planning
MPT, VaR
Skill vs. Luck
Books & Links

 

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