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nafex - Re: [NAFEX] Off topic, investmnent return

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  • From: "William C. Garthright" <billg@inebraska.com>
  • To: North American Fruit Explorers <nafex@lists.ibiblio.org>
  • Subject: Re: [NAFEX] Off topic, investmnent return
  • Date: Sat, 16 Feb 2008 12:52:54 -0600


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%!

Bill

--
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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