Wednesday, July 25, 2018

This Is Why My Money's In The SP500

From today's WSJ.
At the time of the (Sohn C)onference, Heard on the Street columnists took on the stock pickers by throwing darts to create a portfolio of 10 stocks to go up against the 12 stocks picked by the Sohn speakers. Three months later, the darts have prevailed. The Heard team’s 10 picks, eight long and two short, have returned 7.23% on average. The combined performance of 12 picks by Sohn attendees has been slightly negative, lagging behind the S&P 500 by more than 6 percentage points.
My dad could beat them all and did almost every year, but he put an enormous amount of time and energy into investing. He would follow a stock for over a year before buying. He had an MBA from Harvard and there were specific characteristics he sought, mostly found by pouring over their financial documents.

Me, I don't want to spend the time on it. There's at least one article like this every year that shows experts losing to random pickers or the S&P 500. Sometimes, you get investment companies that can beat the S&P 500 for a few years and they try to make hay with that, but in the long run, I think the S&P 500 can't be beat.



tim eisele said...

"in the long run, I think the S&P 500 can't be beat"

I think you are right, not just in the sense of being the best available, but in the sense that it may not even be possible in theory to beat it on any large scale. Anybody who comes up with a way to do better than the S&P 500 will have to do it by doing something unusual that nobody else has twigged to. And as soon as other investors see what they are doing, they will start doing it too, and the profit that used to be generated by doing something unusual will evaporate.

Investors like your father, working for themselves to invest in specific companies that they get to know intimately, may be able to beat it on a small scale. Particularly if they invest in companies that nobody else knows much about. But as soon as they start advising more than a tiny number of other people on what to do, their advantage erodes away to nothing.

Tom said...


Once for fun I looked at the one year performance of the single letter stocks (Agilent, Barnes Group, AT&T, etc). They had a very good year.

I don’t like to work at losing money, so the bulk of my money is in an s&p tracking fund. It’s doing well :-)

Ashwni Kumar said...

great thought.. I read similar inspirational posts here : -