[NAFEX] Off topic, investmnent return
William C. Garthright
billg at inebraska.com
Sat Feb 16 13:52:54 EST 2008
> Funds that return 12 % annually over 15 and 20 years aren't theory,
> but recorded fact.
Er, yes, but so what? It is very, very easy to discover winning
investment strategies after-the-fact. But unfortunately - for those of
us without time machines - this has little to do with how they'll
necessarily perform in the future.
After all, if you take a roomful of monkeys and let them throw darts at
the Wall Street Journal to choose investments, you'll likely end up with
the standard bell-curve of returns. The 'portfolio' of most monkeys will
be very average, with a few doing much better and a few doing much
worse. But you wouldn't give your money to those especially 'skilled'
monkeys and expect their out-performance to continue, I hope. Most
likely, their future results would return to the mean.
Also, investment returns for the past 20 years or so have been amazingly
good. I hope it continues, but there's a good chance we'll eventually
return to the mean (in which case, the next 20 years could be amazingly
poor). You just don't know. I'm certain that some investment strategy
will work exceptionally well going forward, but no one will really know
that ahead of time. Only after-the-fact will that be clear.
Generally speaking, a high return means a high risk. There are, indeed,
ways to mitigate that. But methods that worked in the past might not
work in the future, now that everyone has identified them. The future is
inherently unpredictable. I'm not trying to discourage NAFEX from the
idea of a lifetime membership. Not at all. But play it very safe with
the expected returns. You might expect to beat inflation (not a
guarantee with a declining dollar and $100/barrel oil), but I CERTAINLY
wouldn't count on 12%!
Democracy is not about majority rule; it is about minority rights. If
there is no culture of not simply tolerating minorities, but actually
treating them with equal rights, real democracy can't take root. -
Thomas L. Friedman
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