Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

Ben Carlson: The S&P 500 Is The World’s Largest Momentum Strategy

FYI: In many ways the stock market makes no sense. You would assume that half of all stocks would outperform a market index while the other half would underperform. Then all you would have to do is pick from the top half and avoid the bottom half, make massive amounts of money and go buy an island somewhere.
Regards,
Ted
http://awealthofcommonsense.com/2016/05/the-sp-500-is-the-worlds-largest-momentum-strategy/

Comments

  • MJG
    edited May 2016
    Hi Guys,

    The study's findings reinforce the ubiquitous character of the 80/20 Principle.

    What is that Principle? It basically claims that 20% of the effort produces 80% of output. Like 20% of the workforce generates 80% of the goods.

    In the mutual fund community, 20% of the active fund managers outdistance their Index. It appears that the study shows roughly the same ratio for individual company success stories.

    To further illustrate the predictive power of the 80/20 rule, Bear markets last about 20% as long as Bull markets. When that Bear market reverses its direction, about 80% of the next Bull market is recovered in the first 20% of that reversal period. I am being very generous in loosely using averages in this instance.

    But the 80/20 Principle does appear often. So the referenced article's conclusions are not all that surprising. History does sort of repeat itself. That's why knowing market history is important when investing.

    Best Regards.
  • beebee
    edited May 2016
    @MJG
    That's why knowing market history is important when investing.
    Thanks MJG, one of your most succinct entries.

    Your 20% (lean writing) made an 80% (my approximate mental capacity) impact on me.
  • Hi Bee,

    Thank you for reading, replying, and reacting to my post. I greatly appreciate that unexpected trifecta. I am not especially happy with my present post.

    I was pressed for time with competing and compulsory duties. I failed to provide adequate documentation and references for my statements. I generated the post mostly from memory, and everyone knows how unreliable memory can be. I also failed to fact check the numbers I reported, which I recalled from a James Stack presentation at this year’s Las Vegas MoneyShow.

    Stack is anxious about the current market condition, and is cautiously reducing his equity exposure. He uses multiple technical signals to inform his opinion and then reacts in an incremental manner. His record suggests that he is never entirely without nor fully invested in stock positions. He moves incrementally; so do I.

    Sorry that my submittal was based solely from memory, but I do not take notes while attending investment seminars. I do listen with focus and intensity. At an earlier MoneyShow venue, a woman questioned why I don’t take copious notes as she did. I jokingly replied that I had perfect memory and recall. She took me seriously.

    My submittals do tend to be long-winded, but I believe that full documentation and accurate referencing is essential to establish confidence in the post. We are strangers, and that documentation is mandatory to gain trust. Also stories help to enliven submittals that are statistically heavy and somewhat boring.

    I certainly agree that shorter is better after some measure of credibility has been fashioned. The more I say, the more likely what I say will be foolish. Enough is surely enough.

    A well-meaning thank you for your original post and for its final edited form. That’s enough for now.

    Best Wishes.
Sign In or Register to comment.