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Famed investor Bernard Baruch once said that the main purpose of the stock market is to make fools of as many people as possible.
Is he right?
Burton Malkeil, author of the bestseller, “A Random Walk Down Wall Street,” stated “a blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do well as one carefully selected by experts.”
What’s most surprising is when I found out that researchers, those who are unbiased by the outcome, questioned the professor’s claims it was not because they disagreed with his statement, but rather they thought it was too modest.
Numerous simulations of dart-throwing monkeys at various times have proven the monkeys not only beat professional analysts, but also outperform the market.
In early June I came across an article in The Economist that pointed me to a few academic journal reports on the topic.
“In a study Robert Arnott and his co-authors picked 100 portfolios, each with 30 equally-weighted stocks from the 1,000 largest American stocks by market capitalisation. 94 of the 100 “dartboard portfolios” did better than a market cap-weighted portfolio of all the 1,000 stocks.
Similarly, in another study Andrew Clare, Nick Motson and Steve Thomas randomly picked American stocks to construct ten million indices. An additional twist to their experiment was that the stocks were also randomly weighted. Nearly all of the ten million “monkey indices” delivered “vastly superior returns” compared to a cap-weighted index.”
But, the one caveat is that investors with a high financial literacy earn greater returns.
“…according to a new paper by Robert Clark, Annamaria Lusardi and Olivia Mitchell, individuals who are more financially knowledgeable earn greater returns on their retirement plan investments.”
And that is why you are here.
Hopefully, I, and a few other astute analysts here at Wyatt Investment Research can provide you with the knowledge necessary to become an informed investor.
I can certainly promise you that I will teach you everything you need to know about various options trading strategies based purely on statistics, mean-reversion, probabilities and standard deviations.
Sound too complicated?
It’s not.
In my next post I want to discuss the mathematics behind options and why it is the only investment tool that gives a probability of success over 50%, and in many cases, over 80%.
If you would like even more ideas regarding options trading, don’t forget to sign up for my free weekly options report, The Strike Price. You’ll find everything options and more.Best of all it is delivered directly to you.
Also, if you have any questions along the way please feel free to email me at [email protected].
How to Make 13% a Month Trading Volatility
I recently held a webinar about the “New Bull Market” in volatility and the options strategies I am using to take advantage of it. If you are interested in learning my approach and how I use probabilities to my advantage please click here.