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In a message dated 3/14/2002 8:17:53 PM Central Standard Time, Wade T.Smith
> Hi AaronLynch@aol.com -
> >But what am I saying? Perhaps I should just establish the Immaturity
> >Fund, a mutual fund whose stocks are all picked by a 5 year old. I could
> >"Outperformed FTSE 100 for 1 year, 5 years, and the life of the fund."
> >want to invest? ;-)
> If it were an established fund with that sort of record, yes....
Actually, those statements of "1 year, 5 years, and the life of the
fund." can be deceptive for much the same reasons as are the
stories of the successful young child. Investment companies will
create a bunch of funds, then after 5 years take the most successful
one out of obscurity, rename it, and start selling its spectacular
record to the public. Their motive is less to get attention than to make
money by persuading small investors to invest in the fund. So
we must be careful about what we mean by "an established
> The more interesting thing in the item I forwarded (I'm totally aware of
> how we forget the misses and the impish shine upon this report), is that
> the system that used the standard predictors simply followed the general
> course of the market- and that is, it dwindled, this time.
Well, far be it from me to recommend the "standard predictors."
> The young girl's choices were described as 'random' but, I suspect that's
> a liberty, especially when I see one of her choices is Cadbury
Yes. She may have systematically avoided things hard to understand,
like dot-coms and other technology firms. Moreover, there are
situations where random picks will out-perform the market. For
instance, if most of the FTSE 100 stocks go up for a year but the
index is pulled down by a minority of heavy losers.
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