Parrot beats Investors in Stock Market Contest

Ddalgi, which is Korean for Strawberry, competed with 10 human investors and selected its stocks with it's beak, making random selections from a group of 30 South Korean blue chip stocks.

Ddalgi produced a 13.7% return, far in excess of the average human result which was a loss of 4.6%.

What surprises me is not that the parrot outperformed most investors - we all know that most investors don't know the first thing about how markets work. Rather I was just dumbfounded at the comment by the General Manager of Paxnet, who (according to the article) said, 'Our experiment proved that making long-term investments in blue chips is safe and effective.'

What the *&^#%.

The investment return of 13.7% occurred during a time period in which the KOSPI rallied approximately 12%. Given that the investment strategy is essentially random, we'd expect performance approximately matching the index, as has occurred in this case.

Had the parrot bought in mid-2007 I'm sure we wouldn't be singing its praises. (Although it probably would get a multi-million dollar taxpayer funded bonus!)

But the fact that the index rallied quite strongly over a six week period hardly proves the long term safety and profitability of blue chip stocks. Short term out-performance in no way guarantees long term performance. In fact this statement clearly contradicts the standard disclaimer that the investment world is so fond of sharing, that past performance is no guarantee of future results.

Unfortunately this is the type of rubbish that most of the investment public relies on for their strategy selection and stock market research.

Ignore the so-called experts. Use your brain to determine fact from fiction. The feeling of control from taking charge of your own investment or trading life is priceless.

This goes for trading guru's as well. Read all you can, but test all concepts before applying them in a live environment, to find what really works for you. Approach all trading material with skepticism, but not cynicism, and you will be fine. And that includes my stuff as well.

(Disclaimer: As I'm not a licenced financial advisor I encourage you to ignore everything I write. Maybe the buy and hold strategy is a winner, and I'm just imagining the recent decimation that has occurred to my superannuation accounts (managed funds)) :-)

Add this page to your favorite Social Bookmarking websites