Ex-lawyer turned relationship coach

Monkeys Beat Experts At Stocks

“A blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts,” writes professor Burton Malkiel in his ‘73 bestseller, A Random Walk Down Wall Street.

Malkiel was wrong.

The monkeys did much better than the experts.

In 2013, Rob Arnott and his colleagues created a contest: the team, acting as blind monkeys, versus the stock index.

The scientists randomly picked 30 stocks from the top 1.000 and examined the results after a year.

After 100 contests, the monkey portfolios beat the index 96 times. A feat most paid professionals can’t match.

Before you run off to the zoo and steal a dart-throwing ape, consider the market-breaking question.

How does a primate make a monkey out of professionals?

Because prediction is monkey business. Okay, I’ll stop with the puns. 

Prediction is a fool’s game.

No one knows what the market is going to do next. Not me. Not the consultants at McKinsey. And not the chimp who will type out the works of Shakespeare.

How could anyone know what comes next?

Especially since the internet boosted the complexity of the world from Rubiks Cube to quantum theory.

Prediction is hard. Sometimes close to impossible.

And we don’t like that. We like to believe actions have fixed consequences, and that hard work leads to success.

Stockbrokers serve this need.

In a world of randomness, pundits offer security. Even if their best prediction is hardly more accurate than the flip of a coin.

The long-story short, no one can reliably beat the market over a long period of time.

If you’re paying someone to pick stocks for you, you’re probably not even beating the index. So fire your investor and keep the service fees in your pocket.

Next get a monkey to play the market for you.

P.S. Friends with far more knowledge on investing than I always seem to recommend holding onto an all index fund portfolio. Read The Little Book Of Common Sense Investing for more.

By Jeroen Elsing
Ex-lawyer turned relationship coach