If you could build the perfect portfolio of stocks with hindsight...

BrockStoker

I came across this the other day, and thought it might be of interest to others on here.



https://www.bloomberg.com/news/articles/2019-03-08/the-perfect-bull-market-portfolio-might-have-blown-up-your-firm


I don't see why they are criticizing the performance because of the "more than index" draw-downs. For me at least, it's the final result that would matter more, and a bit of volatility is actually welcome. The performance shares similarities with my own high octane portfolio, unsurprisingly.


I do find it interesting that their conclusion is that even god would be a poor fund manager. It does imply that some fund managers who have consistently out performed for long periods are actually performing almost "god-like" feats.

masonic

It seems a very silly article. God would be able to consistently outperform the index because during times when any index constituents had a positive period He could invest in the best of those, and during times when all constituents had a negative period he could invest in those with the lowest falls.

If only God actually existed

londoninvestor

Bloomberg wrote:

“If God is omnipotent, could he create a long-term active investment strategy fund that was so good that he could never get fired?”

I sort of assumed that if you were omnipotent you didn't have a boss or an annual appraisal?

BrockStoker

Yes, it's obviously very hypothetical, and a little bit fun (rather than serious), but I do wonder if there might be a useful/practical takeaway for investors?

londoninvestor

BrockStoker wrote: »

Yes, it's obviously very hypothetical, and a little bit fun (rather than serious), but I do wonder if there might be a useful/practical takeaway for investors?

Being a bit more serious I'm not sure how much it tells us. Because, to take a silly statement of the obvious, we don't have hindsight until after the fact.

So at some point on your portfolio's trajectory where you're heavily down, it might well be that holding on to your current portfolio is the best thing you can do - but you can't know that.

So if it's your personal investment, do you stick with it or doubt yourself? (Because it's very possible that you have actually invested in the wrong thing for the long term.)

And if it's a fund, do you stick with it or doubt the fund manager?

However, you see plenty of posts on here where someone's reaction to a market fall is to panic-sell, and an article like this would be a good way of having them reflect on a different view.

Thrugelmir

BrockStoker wrote: »

Yes, it's obviously very hypothetical, and a little bit fun (rather than serious), but I do wonder if there might be a useful/practical takeaway for investors?

Be a contrarian investor. Take the time to research and identify specific targets. Take the long term view and have the conviction to build sizable stakes. Through thick and thin stick with the holdings, ignoring short term volatility. Ultimately one will come good and repay the faith.

After all as an investor. Never forget you are the market. If you hold the shares then someone else doesn't.

short_butt_sweet

Thrugelmir wrote: »

Be a contrarian investor.

everybody wants to be a contrarian investor. except me.

eskbanker

short_butt_sweet wrote: »

everybody wants to be a contrarian investor. except me.