Believe it or not--about 35 years ago, Tom Brokaw was broadcasting the NBC Evening News report and they did a clip of "Who Can Pick the best stocks on the Stock Exchange?" They showed results from a Wall Street broker, a child of about 12 years and a CHIMPANZEE. Guess who won that contest!! YEP......the CHIMP!!! My husband I really got a…
Believe it or not--about 35 years ago, Tom Brokaw was broadcasting the NBC Evening News report and they did a clip of "Who Can Pick the best stocks on the Stock Exchange?" They showed results from a Wall Street broker, a child of about 12 years and a CHIMPANZEE. Guess who won that contest!! YEP......the CHIMP!!! My husband I really got a charge out of that--and wondered where we could pick up that "smart" chimpanzee for a "hot tip"--LOL!!
Yes, similar point has been made in investing books over the years. I'm no market expert, but I believe the point is valid. A simple (?) version: On the average, it's impossible for a randomly chosen investor to "beat the market." There are many variations on this observation, like it's impossible for everybody to be above average. Decades ago, one of the financial periodicals literally had a dartboard portfolio as sort of a joke. I think the choices were not made by an ape, though. More relevant to my argument, if you made ten, or better, a hundred such portfolios chosen at random, you would be almost guaranteed to match the overall market's performance.
A less obvious moral is that, out of a huge population, there will be some that do exceptionally well. These, of course, are the superstars that everybody looks to, that get written up in the press and so on. What is too easily forgotten is that there are the big-time losers at the "left end" of the bell curve. And the vast majority in the middle? Well, they're average and who cares about them?
The preceding is NOT to claim that wisdom and experience are of no value. It IS to claim that plain dumb luck explains much. Of those many dartboards and chimps? A few would have produced handsome returns. A few would have lost it all. And most would have been middling.
Of course - that applies to every aspect of human existence, doesn't it!! I prefer being "middlin'" to exceptional myself. Probably the Libra in me--LOL!
Believe it or not--about 35 years ago, Tom Brokaw was broadcasting the NBC Evening News report and they did a clip of "Who Can Pick the best stocks on the Stock Exchange?" They showed results from a Wall Street broker, a child of about 12 years and a CHIMPANZEE. Guess who won that contest!! YEP......the CHIMP!!! My husband I really got a charge out of that--and wondered where we could pick up that "smart" chimpanzee for a "hot tip"--LOL!!
Yes, similar point has been made in investing books over the years. I'm no market expert, but I believe the point is valid. A simple (?) version: On the average, it's impossible for a randomly chosen investor to "beat the market." There are many variations on this observation, like it's impossible for everybody to be above average. Decades ago, one of the financial periodicals literally had a dartboard portfolio as sort of a joke. I think the choices were not made by an ape, though. More relevant to my argument, if you made ten, or better, a hundred such portfolios chosen at random, you would be almost guaranteed to match the overall market's performance.
A less obvious moral is that, out of a huge population, there will be some that do exceptionally well. These, of course, are the superstars that everybody looks to, that get written up in the press and so on. What is too easily forgotten is that there are the big-time losers at the "left end" of the bell curve. And the vast majority in the middle? Well, they're average and who cares about them?
The preceding is NOT to claim that wisdom and experience are of no value. It IS to claim that plain dumb luck explains much. Of those many dartboards and chimps? A few would have produced handsome returns. A few would have lost it all. And most would have been middling.
Of course - that applies to every aspect of human existence, doesn't it!! I prefer being "middlin'" to exceptional myself. Probably the Libra in me--LOL!