Given where stock markets stand today vs. 10 years ago, it is clear that Buy and Hold Investing has had a rough decade. Already the strategy has taken a beating in the financial world for its poor showing.
But this is just ridiculous — A study of trading strategies has found that even simply flipping a coin to make monthly market investment decisions blew away Buy and Hold during the last decade.
CXO Advisory: 85% of Monthly Coin Flippers beat Buy and Hold, and the average Monthly Coin Flipper beat the market by 29% on a cumulative return basis. In other words, the sample period presents a tailwind for market timers.
It’s another way of saying that market-timing kicked the pants off of Buy and Hold last decade. This should hopefully also help people take Wall St. traders’ egos down a notch. Any active trader except an unlucky fool beat buy and hold during the last decade.
It also means that building a successful quant fund probably wasn’t very hard either, theoretically it could have been done with an Excel sheet simply simulating a coin flip. So coming soon… the [Insert ETF-Flogging Company Here] Ultra Short Coin Flipper ETF — Proven to outpeform the market over a 10 year time period! Substitute coin flipper with a slightly more fancy term and we’re sure it could sell.
(Via Abnormal Returns)
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