The result: on average, the monkey portfolios outperformed the market by 1.7% each year. On average, 98 monkeys achieved higher returns in one year than the 1,000 largest shares in the USA on average.
98 out of 100 random monkey portfolios beat the market? How is that possible?
98 out of 100 random monkey portfolios beat the market? How is that possible?
••
@Investor_in_Jogginghose the key message of the test is that random selection methods can often perform as well or better than the decisions of experts.
The logical explanation for this, or you could say trick, lies in the distribution between small and large caps. Due to the equal weighting in this test, it is very likely to beat the index/market, as smallcaps have a higher long-term average return than largecaps.
Since there are more smallcaps than largecaps, a random selection tends to contain more smallcaps.
You can see from me that this works 🐒🙉, the majority of my 100k portfolios do not contain any of the "large caps" that many people have in their portfolios🤣
The logical explanation for this, or you could say trick, lies in the distribution between small and large caps. Due to the equal weighting in this test, it is very likely to beat the index/market, as smallcaps have a higher long-term average return than largecaps.
Since there are more smallcaps than largecaps, a random selection tends to contain more smallcaps.
You can see from me that this works 🐒🙉, the majority of my 100k portfolios do not contain any of the "large caps" that many people have in their portfolios🤣
•
22
•Then they would have done worse in today's world. The performance only came from the heavyweights.
••
@Investor_in_Jogginghose even today there are enough small caps that outperform the heavyweights, but since their market weighting is very small, the big ones pull the market.
If you happened to have the same weighting of small caps in your portfolio as the heavyweights, I'm not sure you wouldn't outperform the market today...
That's exactly the reason why the monkeys have mostly beaten the market over the last 50 years. Because heavyweights also existed before the big tech era.
The weighting brings the performance!
Compare, for example, the $VDEV where all the heavyweights are +15% with my "monkey selection" +17%
If you happened to have the same weighting of small caps in your portfolio as the heavyweights, I'm not sure you wouldn't outperform the market today...
That's exactly the reason why the monkeys have mostly beaten the market over the last 50 years. Because heavyweights also existed before the big tech era.
The weighting brings the performance!
Compare, for example, the $VDEV where all the heavyweights are +15% with my "monkey selection" +17%
••
@TomTurboInvest I don't actually have an Etf, but around 30 individual stocks. Smaller stocks are also highly weighted, such as Rational and Dominos Pizza. However, NVIDIA and Amazon have contributed the most to my outperformance.
•
11
•@Investor_in_Jogginghose Nvidia was certainly an exception for a large cap this year, but the annual performance of Amazon or other heavyweights such as Apple and Alphabet was nothing that you wouldn't find in the small cap sector. Ultimately, it always depends on the composition.
The statistics speak for themselves, there are far more small caps than large caps. And doubling market capitalization, for example, is simply easier with 200 million than if you are already worth billions.
NVIDIA has performed extremely well this year, you could say it has run ahead. Let's see how it goes in 2025, in the worst case it will "lag". 🔮🤷🏽♂️
The statistics speak for themselves, there are far more small caps than large caps. And doubling market capitalization, for example, is simply easier with 200 million than if you are already worth billions.
NVIDIA has performed extremely well this year, you could say it has run ahead. Let's see how it goes in 2025, in the worst case it will "lag". 🔮🤷🏽♂️
••