Michael,
We are comparing apples and oranges. Using options and futures against an equity index is not a fair comparison as you yourself have pointed out. You have raised your portfolio's beta by doing so and achieved a higher return, which is not inconsistent with MPT.
Historical studies show that fund managers were always overpaid for underperforming. But I understand that you were one of the overperformers that MPT indicates are rare, but do exist. Congratulations! But again that doesn't invalidate MPT, unless majority of your peers were overpreforming as well. Which I know is not true from historical case studies in the 70's and 80's.
Mutual funds underperform the market not on the average, but in absolute percentages in overwhelming ratios. As I said, 80% of mutual funds underperformed the market last year. 1 in 5 is not even a fighting chance IMO. But, it is indeed true that some folks will either luck out or are superbly brilliant to either pick the correct mutual fund (like the Internet Fund ;-)). Even there, the beta of the successful funds is significantly more than the market. Again, just as MPT predicted.
The point is, beating the market by assuming the same level of risk is not impossible by any means, but is extremely difficult. Have you asjusted your returns by beta and checked if you still beat the market. You might as well have gone long the S&P index in a leveraged account, may be?
-BGR. |
