Originally Posted by
Excargodog
Yep. And anyone in the right side of the bell shaped curve STAYS in the right side of the bell shaped curve…right up until they don’t. You can do it with coin flips. If you do enough of them, the win-loss distribution of a binomial approximates a Gaussian distribution
a certain small percentage will - by random chance - give you 40 ‘heads’ in a row, even with an honest coin.
That has no bearing whatsoever on the results of the next toss, although over time the central limit theorem implies that the expectation (50-50) is pretty much where you will end up with enough flips.
You are entitled to your opinion. What you do not consider is a team that sees the horizon and understands it differently and more correctly than the average coin flip. Most investment managers do not. Only a few percent do. They have proven that in over 40 years. It is not just a bunch of lucky coin flips.
As an example, March-April 2020 the S&P 500 dropped 34.5%. It was a rapid, sudden drop due to COVID-19 panic. Most investment people use the rule 10 - 20% being a correction and anything more is a bear market. They then called for investing in Value stocks, which lead after a bear market. In a bear market, Value stocks get unusually beaten up. So, in the recovery of a new bull market they lead the rise in stocks.
But, there were no excesses which classically are root causes of bear markets. Bear markets (with only The Great Depression in history as an exception) do a slow rolling drop at the top. Corrections are sudden and rapid. They correctly called this a correction, not a bear. Recovery was at a rate typically seen in a correction, much more rapid than a bear.
They said this was a continuation of a late stage bull market. Late stage bull markets have Large Growth stocks lead the market (think Apple, Alphabet (Google), Amazon). They did not shift my portfolio from Growth to Value. The first few months, Value did predominate, because many investment managers loaded up. Then the Value rally fizzled. By later in the year and this year Growth has outperformed. This proved there understanding was correct, and most investment firms had called it wrong. My portfolio beat the market averages and most other investment managers over the entire year of 2020 and are beating them in 2021. (My portfolio is the total number of dollars I have them invest. It is not what stock is hot in their portfolio, trading away under forming stocks at the end of the quarter - often referred to as ‘window dressing’.)
I could go through a number of other examples. They are correct in their predictions 70% of the time. They have enough counter investments so if they are wrong, my portfolio does not get beaten down too badly. But, taken as a whole, they outperform the markets and most other investment managers. Facts and their explanations (which one can look back on to check their accuracy) show this to have a high accuracy.