4 ms·
I think the logic here is flawed. Take a really simple portfolio... I buy (or go long on) 1 share of GOOG and 1 share of MSFT. Over a decade I make an average
by kypro 7y ago
I think the logic here is flawed.
Take a really simple portfolio... I buy (or go long on) 1 share of GOOG and 1 share of MSFT. Over a decade I make an average of a 7% return per annum, while the random strategy makes, 8%.
What exactly would the inverse of my strategy be? To go short on GOOG and MSFT? That would do even worse and in that case I'd actually lose money.
- deleted 7y ago[deleted]
- jpttsn 7y agoWould it be long every stock except GOOG and MSFT?
- JKCalhoun 7y agoBoglehead reporting in, you should long every stock.
- jimclegg 7y agoObservation: I find the uptick in stock buying articles just when the market is at it's frothiest quite interesting. Stay vigilant out there traders, don't eat the 30% haircut that will be visiting global financial markets shortly.
- harryh 7y agoI'm confident that haircut will come. I am not at all confident that anyone can predict when it will come well enough to avoid it. Remember that the last 3 months of 2018 saw the market drop ~20%, only for it to recover over the next 3. Were you able to sell in September and buy at the bottom in December? Almost certainly not...
- jimclegg 7y agoYes, our prop group made quite a bit with out-of-the-money AAPL 135 puts (AAPL will hit this strike price again). Alarms bells are ringing in this market... If your good at risk management and can initiate low cost perma-bearish positions, you will be rewarded heavily over the next year or so. Alpha chasers that don't have risk management skills should just buy Bitcoin (dont sleep on this, the halvening is May 2020-ish). Dollar-Cost-Averaging will get you a decent entry price. Warning: Bought more 120,130,140 AAPL puts in prep for next collapse, if your in my way, I will literally eat your lunch. Good luck guys!
- FakeComments 7y agoIt’s a general fact of mathematics: If you know a set, U, has an average A; and a subset, S, has an average B < A; then the complement, U - S must have an average C > A. Otherwise, there’s no way for the partition to average out to A. The sibling poster is correct: if you know a group underperforms, then the complement overperforms as an ensemble. In your example, you should buy everything but MSFT + GOOG.
- rongenre 7y agoBuy random, short non-random.
- turk73 7y agoTell us, have you shorted many stocks before? It is simply not the opposite of going long.
- lazyjones 7y ago> What exactly would the inverse of my strategy be? To go short on GOOG and MSFT? No, it would be to take 1 share of every stock except GOOG and MSFT and it would work (well, under the given assumptions and with random = 1 stock of every pick).