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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Eggolas Moria who wrote (53837)3/29/1999 4:02:00 PM
From: Michael Bakunin  Read Replies (1) | Respond to of 132070
 
What, an eight-year record of index-ocrity from '87 to '94 wasn't enough? IMO, to counter your argument, here are two why such a strategy likely will lead to mild underperformance of the indexes over the long haul. One, the largest companies are the index, for all intents and purposes. Therefore, over the long term, you are guaranteed a return near that of the index -- either somewhat lower or somewhat higher. Two, large companies are the most-followed, and therefore those most likely to be efficiently priced. Therefore, it is unlikely that these companies will be outperformers. -mb



To: Eggolas Moria who wrote (53837)3/29/1999 7:35:00 PM
From: Michael Bakunin  Read Replies (1) | Respond to of 132070
 
A real quick version of the years from '79-'86, using the top 5 stocks vs the rest of the "market" (Russell 3000): discounting transactions cost, a top-5 portfolio rebalanced at year-end returned 11.3% per year, while the rest of the market ex-top five returned 18.7% annually. The top five beat the market only in 1985 (37% to 32%) and 1983 (27% to 23%). Not that this is meaningful, just instructive.


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