At the beginning of this year I decided to start a little experiment with the stock market.
I wanted to see how well some financial experts and the S&P 500 did against the stock picks of complete amateurs, as well as some very risky (or even random) stock choices. I’m tracking nine different “indexes” and if you’re really curious to follow along with the progress, you’ll notice I have a leaderboard that updates in real time on the sidebar.
Well it’s been over a month and I wanted to revisit some of those picks and take a look at what is happening.
To see the full performance details of every stock picked in this experiment, click here.
I’m Kicking the S&P 500’s Butt!!!
If you hadn’t heard very few professional fund managers are able to beat the market. Considering how hard it is to beat the market, I am absolutely shocked that I’m not just beating the S&P in all 8 of my choices, but I’m beating the S&P by a minimum of 2.2% in all of them.
We’ll see if this holds for the rest of the year (highly unlikely) but it does show that you don’t have to be an expert to beat the market in the short term.
31.61%? That Can’t Be Real!
Most finance professionals suggest you expect something like a 7-8% annual return on your investments. The Worst in 2011, which is just the 10 companies in the S&P 500 that lost the most value last year, has gotten over 30% in just over a month! This is one of my favorite theories of investing. If the price dips on a good company (which most companies in the S&P are pretty good), it’s on sale so buy it!
If I actually owned these stocks, I don’t even know what I would do. Do you sell and lock in your 31% gain, or do you hold for more? I would want to sell, but I would probably hold and see what happens.
The biggest gainer so far is Netflix (NFLX) at an 86% gain since December 30th. 86%!? You can go a decade and not have a cumulative 86% return on a decent performing stock. All ten stocks are positive, and nine of them are above 15% on the year. Cablevision (CVC) is pulling up the rear with only a 4.85% gain.
Random vs. Vanguard Mutual Fund
In what is probably my favorite result so far, a random selection of stocks is not only almost double the S&P 500, but it is beating a Vanguard Mutual Fund that was supposed to be a great performer this year. The main point of this exercise is to determine how well a random selection of stocks can do against “experts”, which makes the Random vs. Vanguard the most important comparison. And I like to see random winning.
One Month Anomaly, or Real Trend
What boat are you in? Do you think the Vanguard fund and the S&P are going to end up on top, or can Random and Worst in 2011 hold on over the course of the year?