Monkey at Par With YOUR Stock Picking Skills
Want to build or preserve wealth? One way or the other stocks will pop up. Many of us, whether personally or professionally, also believe we are gifted with superior stock picking skills, however, that may be an illusion/PLAIN WRONG:
Professor Burton Makiel from Princeton University, claims in his book A Random Walk down Wall Street: The Time-tested Strategy for Successful Investing that ”A blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts.”
That’s a crazy claim in it self ready to blow some ego’s, yet, it actually get worse. Rob Arnott, CEO of Research Affiliates actualy claims that ”The monkeys have done a much better job than both the experts and the stock market.”
The randomness the monkey brings in has a positive effect in that they are likely to include mostly smaller companies. As small companies outperform the big ones, Malkiel’s monkey portfolio has been able to beat the market. For more details check the article Forbes wrote on this.
Perhaps we should take the worlds most successful investors advice, Warren Buffett, and jump into index tracking funds after all?!?