The Biggest Losers Beat The Olympians Out of the Blocks

Readers:  Thank you for putting together the worst portfolio you could think of.

I asked you to put together a collection of stocks that you thought were utterly hopeless.  Of course, one person’s junk is another person’s treasure….but the bottom line is that you, as a collective group, were trying to create the worst portfolio of stocks that you could.

But I think your “lousy portfolio” has a chance of beating the professionals–if we leave it alone and don’t mess with it.

You also submitted the top 10 U.S. mutual funds that you could find.  And you certainly put together a list of “All Stars”.  Well done!

But how will your “loser portfolio” after all commission and transaction charges ($9.99 per commission purchase) stack up against the average results of these 10 “All Star” mutual funds, after all commissions and charges?

Right out of the starting gate, your biggest losers are beating the metaphorical Olympians.  Of course, this is a marathon and not a sprint, but the biggest losers might maintain their lead–or pull even further ahead in the years to come.  Fund managers will buy and sell stocks within these “All Star” mutual funds to gain an edge–that’s what they’re paid to do.  They’ll follow trends, interest rates and the latest political news.  But with the loser portfolio, we will do NOTHING.  No buying, no selling—we’ll do absolutely nothing.

To read about how it might be possible for our “loser portfolio” to actually win, check out the theory behind the efficient market hypothesis:  … read more

For a complete list of stocks in your “Loser portfolio” check this out.

Portfolio: 23 Loser Stocks – 15/04/2010

Company Name Cost Current Value Gain / Loss Gain / Loss % Today’s Gain / Loss






Alcoa Inc. $14.35 $21,861.45 $126.36 0.58% $136.35
American Int. Group Inc. $40.17 $21,499.34 -$231.80 -1.07% -$221.81
AOL Inc. $28.52 $21,541.74 -$192.87 -0.89% -$182.88
ATC Technology Corp. $18.21 $21,802.44 $61.65 0.28% $71.64
Bank of America Corp. $18.68 $22,581.60 $839.73 3.86% $849.72
Burger King Holdings Inc. $21.83 $21,832.32 $89.61 0.41% $99.60
Citigroup Inc. $4.62 $23,195.65 $1,448.56 6.66% $1,458.55
Ciena Corp. $18.07 $22,363.77 $627.60 2.89% $637.59
Ford Motor Co. $12.80 $22,681.65 $941.45 4.33% $951.44
GameStop Corp. Cl A $23.67 $21,986.10 $256.23 1.18% $266.22
Goodyear Tire & Rubber $13.96 $22,185.92 $441.83 2.03% $451.82
Juniper Networks Inc. $31.26 $22,107.95 $379.21 1.75% $389.20
Kimco Realty Corp. $16.51 $21,453.93 -$286.56 -1.32% -$276.57
Krispy Creme Doughnuts $4.88 $22,448.16 $702.65 3.23% $712.64
Eli Lilly & Co. $36.94 $21,514.92 -$204.03 -0.94% -$194.04
Microsoft Corp. $30.46 $21,974.66 $253.82 1.17% $263.81
Nutrisystem Inc. $19.02 $22,197.06 $458.64 2.11% $468.63
News Corp. Cl A $15.48 $22,241.15 $495.81 2.28% $505.80
Pfizer Inc. $17.19 $21,593.55 -$149.14 -0.69% -$139.15
Banco Sntndra Sa $14.60 $21,992.53 $258.03 1.19% $268.02
Textron Inc. $22.56 $21,940.64 $192.45 0.88% $202.44
USG Corp. $18.87 $22,855.68 $1,118.97 5.15% $1,128.96
Zions Bancorp. $24.58 $23,302.24 $1,572.37 7.24% $1,582.36






Cash
$46.12


Overall gain/loss

$0.00

Total
$509,200.57 $9,200.57 1.84% $9,430.34


And for the group of professional funds (that are actually TRYING to do well)….here they are:

Portfolio: Selected Super Funds – 15/04/2010

Company Name Cost Current Value Gain / Loss Gain / Loss % Today’s Gain / Loss






American Funds Mut;A $25.91 $41,736.43 -$2,499.46 -5.65% $375.24
Amer Cent:Hertge;A $18.47 $50,800.50 -$2,073.64 -3.92% $801.36
Dodge & Cox Stock $104.55 $50,286.48 $693.10 1.39% $693.10
FMI:Large Cap $15.19 $50,425.88 $296.19 0.59% $296.19
Fidelity Puritan $16.99 $50,615.58 $441.30 1.25% $441.30
Fidelity Sel Energy $45.57 $50,615.58 $625.29 0.88% $625.29
LM CM Value Trust;A $39.72 $50,848.36 $880.60 1.68% $880.60
American Funds NWld;A $52.57 $50,461.05 -$2,372.50 -4.49% $502.50
T Rowe Price Eq Inc $23.00 $50,696.09 $717.09 1.43% $717.09
Sound Shore $30.64 $50,642.55 $698.71 1.34% $668.71






Cash

$196.04


Overall gain / loss

$0.00

Total
$497,376.68 -$2,623.32 -0.52% $6,001.68






Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School (2nd Ed. Wiley 2017) and The Global Expatriate’s Guide To Investing: From Millionaire Teacher to Millionaire Expat (Wiley 2015). My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I’m happy to comment on your questions. However, please read the Terms of Use, Privacy Policy and the Comments Policy.

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4 Responses

  1. Kevin says:

    This is going to be a great comparison! This reminds me of the wall street guys that figuratively had monkeys select stocks by throwing darts at a list of stocks on a wall, and found they beat more than 90% of fund managers out there…

    I believe that the efficient market hypothesis works because you have all of these professionals out there trying to beat each other, buying and selling, looking at company reports and try to get an edge over the other guy. All this activity helps the market to find an efficient price over time. Now, if you buy a low-fee indexed fund you benefit from all of this activity, but without paying all of the fees! If ever most of the money ended up shifting to indexed funds, they might lose some of this advantage…

    If you believe in the strong version of the efficient market hypothesis, then you should also believe that there is no way to beat the index; you could only come close to matching it. However, I don't believe in this strong version for a couple of reasons:

    1) Information doesn't flow perfectly, so there are always opportunities.

    2) I also believe in what I call "trend-based" investing.

    For example, if you had been investing in commodities and gold since 2002, you would have absolutely destroyed the general index. Completely crushed it. And it would have been as easy as buying a few bars of bullion and leaving them under the bed. Of course, it is easy to say this in hindsight, but someone back in 2002 could have looked at where debt levels and monetary policy were going, and they also could have looked at the booming economies of Asia and understood that this would be placing increased demands on commodities.

    So is it possible to beat the index? Yes, but it's going to be pretty hard if you're paying another guy a bunch of fees to just invest in the same stuff an indexed fund would probably invest in anyways!

  2. Kevin,

    I think you're right about potential inefficiencies in the market.

    But I can just imagine those monkeys beating 90% of the pros too–because we both know that random darts can beat most of the pros after fees.

    From what I have seen, most people follow a herd mentally. And to beat the market, you have to step out of the herd.

    But most people, including most mutual fund managers, are uncomfortable making educated contrarian bets. It's more acceptable to be wrong when everyone else is wrong. Nobody really gets fired by following the herd. Stepping away from the herd, which increases your risk of being the exception (in a positive or negative way) is tougher for finance professionals (or anyone, for that matter) to stomach.

    Thanks for such a detailed and educated comment Kevin.

  3. barry says:

    Any update on the loser portfolio's?

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