Monkeys again beat Wall Street

Experiment with “monkeys investors“, in which a simple monkey played up gurus of Wall Street in the stock market, has become a byword.

Several years ago, a study commissioned by the University of Cambridge has shown that, historically, the perfect balance of long-term investor in the portfolio is achieved if 80% invested in equities and 20% in cash (or cash equivalents such as treasury bonds). At the same time it is necessary to reallocate the portfolio once a year.

And it turned out that if 20% of the money put on deposit in the bank, and the other 80% is distributed on shares that have chosen monkeys can earn quite a lot.

At the end of 2014, according to data Hedge Fund Research Inc., the average hedge fund lost 0.6%, while “portfolio monkeys” showed an increase of 2.3%.

A year earlier, hedge funds showed returns of 6.7% and a monkey and a bank account earned 21%, that is, were three times more efficient!

In 2012, four times the monkeys outperformed hedge funds, earning 13% compared to 3.5% in funds.

MarketWatch columnist Brett Arends thinks that this result should not be surprising.

“Run a large hedge fund very expensive: it is necessary to pay salaries, bonuses, and so on (imagine how much to pay for health insurance, given the statistics on heart attacks among traders). And all of these costs, investors pay out of pocket. The question then arises: why do we need hedge funds if a random selection of stocks gives the best results? ” - Said Arends.

“In other words, managers need to beat the market by about 60%. Every year. We can only wish them luck, because in reality it is almost impossible,” - says Arends.

In his view, investors need to escape from the hedge funds, but, according to The Wall Street Journal, Investors instead just come. Worldwide, hedge funds invested about $ 2.5 trillion.

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26 June 2015

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