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InVivo Therapeutics Holdings Corp. Message Board

  • envy_vo envy_vo Sep 19, 2013 12:49 PM Flag

    For those who like to read my posts - Part 1

    There has been much hoopla about the advantages of diversification on this board, and surely any reasonable discussion is a good thing for all serious investors.

    My position is and has been that a Message Board Poster or any stock enthusiast for that matter just does not know enough to be able to pick a better diversified portfolio than an index fund or other broad-based fund.

    Consequently, I favor trying to pick one stock.

    Of course, when it comes to investing (betting), competing strategies always ask empirical questions. That is, we need to look at the data produced by each strategy.

    The following is the result of years of pitting stock market EXPERTS against throwing darts at the stock page, a contest sponsored by the Wall Street Journal:

    The Long-Term Value of Analysts' Advice in the Wall Street Journal's
    Investment Dartboard Contest

    Gary E. Porter

    John Carroll University - Boler School of Business

    Journal of Applied Finance, Vol. 14, Issue 2, Fall/Winter 2004

    Abstract:

    For nearly thirteen years, the Investment Dartboard column featured the stock recommendations of prominent equity analysts in a contest with the stocks selected by Journal staffers throwing darts. Over the life of the column, investors who rebalanced their portfolios according to the analysts' recommendations achieved higher terminal wealth, but a lower risk-adjusted return, than an investment in an S&P 500 index fund, but investors who bought and held the securities selected by darts achieved the greatest terminal wealth and risk-adjusted return. The darts out-performed the analysts on a nominal and risk-adjusted basis during the recent market decline, with darts and analysts generating higher nominal and risk-adjusted returns than the market index fund.

    A careful reading suggests even the experts had a lower risk-adjusted return than the S&P 500 index. The whole story is even worse for the experts.

    So are the posters here better than the so-called experts?

    GLTA

    Sentiment: Strong Buy

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    • I'm going to just take a wild guess and say your stock portfolio is down 4.93% today.

    • 20 darts have a much greater probability of hitting the bulls eye than one dart.

      • 1 Reply to hotairstocks3
      • Hotair,

        But we don't use darts. If you want to use darts, just buy the index fund.

        On the other hand, we do have a limited amount of time, energy, and expertise to devote to our due diligence.

        Do you think it better to just throw money at 20 different stocks about which you know pretty much nothing? Or do you think it better to invest all of that money in the one stock that kept winning comparison after comparison with the other 19 until it was the only one left standing?

        A more apt analogy would be using 1 or 20 rifles to hit a bull's eye at a county fair.

        Do you just want to use all 20 (a dollar a shot) to see how many bull's eyes your hit?

        Or would you like to spend the time to compare all 20 to determine which single rifle (sight/balance etc.) has the greatest probability of hitting a bull's eye and then firing that gun twenty times (a dollar a shot)?

        You invest the same amount of money - which strategy do you believe would produce the most bull's eyes?

        GLTU

        Sentiment: Strong Buy

 
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