Oldest known version of this page was edited on 2006-02-27 23:34:18 by RichardBerg []
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Pick up a copy of Forbes or Fortune magazine.
They always have good picks with their research listed, a good way to ease into the market.
That's ludicrous. If a random econ or journalism student had the skill to beat the market, what would he logically choose?
(1) don't tell anyone, amass a private fortune
(2) take a 7-figure job running a mutual fund
(3) write canned 800-word columns for a living
#1/#2 is a tossup depending on his personality, but I sure wouldn't bet on #3. Of course, the vast majority of #2s will also fail to meet that goal, but at least they're pulling down enough salary that it doesn't matter. Enough BS psychoanalysis, though: let's see some data.
The Yanni Bilkey Investment Company provided further evidence against relying on trade magazines in a 1991 study. Each year Forbes recommends a "Hall of Fame" list of mutual funds individuals should buy. For the seven five-year periods beginning in 1980, only once, and by the smallest of margins, did the group beat the S & P 500 Index. However, they never once beat the average equity fund. Another study on this famous list covered the period 1983-1990 and found that a portfolio of the Hall of Fame funds would have returned 10.46%, versus 16.43% for the S&P 500 Index.
[source: Larry Swedroe's first book]
Damn. When I went looking for data I knew it would be ugly, but I didn't know it would be
that ugly...they were behind by over 50% after just 8 years, and that's not counting the capital gains taxes from trading in/out of each year's picks. Even the average actively managed mutual fund isn't that bad. Lest you think magazine writers have gotten any smarter since that study, here's how they did last year:
Twenty stocks selected by four gurus in Business Week 12 months ago produced an average percentage price gain for 2005 of 0.8 percent, through Friday.
...
A year ago Fortune magazine asked 20 notable stock-pickers for just one stock each for 2005. The average return of the 20 names they submitted is 2.9 percent so far this year--again, trailing the simple S&P 500 index. Just seven of these 20 stocks beat the S&P 500.
http://www.chicagotribune.com/business/columnists/chi-0...-navrailbusiness-nav∞
Keep in mind 2005 was a year in which literally every sector was up.
Intl (emerging): +26.8%
Commodities: +19.3%
Intl (developed): +13.6%
U.S. REITs: +9.6%
U.S. Large Value): +6.6%
U.S. Largecap: +4.8%
U.S. Smallcap: +4.6%
Lehman Agg Bond: +2.4%
Congrats Fortune, you beat a bond index by 0.5% in a year when every investor on the planet was forecasting higher interest rates. Sounds like a ringing endorsement to me.
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