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 if you ask Professor Burton Malkiel from Princeton University.
In his book A Random Walk down Wall Street: The Time-tested Strategy for Successful Investing Malkiel claims 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 itself, ready to blow some egos, yet, it actually gets worse. Rob Arnott, CEO of Research Affiliates actually claims that ”The monkeys have done a much better job than both the experts and the stock market.”
The randomness the monkey brings in seems to have a positive effect, in that they are likely to include mostly smaller companies. As small companies tend to outperform the big ones, Malkiel’s monkey portfolio has been able to beat the market. Perhaps we should take the worlds most successful investors advice, Warren Buffett, and jump into index tracking funds after all? For more details check the Forbes article.