No. of Recommendations: 0
sazani writes,

<<<MadCapitalist:
It sounds like a great way to buy high and sell low.>>>

When you backtest the results, it beats the SP500 80% of the time and 100% of the time over every five-year rolling period for the last 30 years.

The turnover is 10 to 20% per year depending if you decide to own 10, 15, or 20 stocks.


Check out this study by Dr. William Bernstein.

The 15-Stock Diversification Myth
http://www.efficientfrontier.com/ef/900/15st.htm

In order to investigate this problem, I looked at the stocks constituting the S&P 500 as of 11/30/99, and formed 98 random equally-weighted 15-stock portfolios for the 12/89-11/99 10-year holding period. Below is a histogram of the annualized portfolio returns:

</snip>


Astonishingly, 69 of the 98 randonly selected portfolios Bernstein examined beat the S&P500 annualized return of 18.94% per annum for that 10 year period. Hard to see how that's bad and something to be avoided.

intercst

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