{"id":77,"date":"2013-11-04T12:13:41","date_gmt":"2013-11-04T12:11:30","guid":{"rendered":"https:\/\/www.joinecrowd.com\/blog\/?p=77"},"modified":"2024-09-11T09:52:30","modified_gmt":"2024-09-11T07:52:30","slug":"average-return-of-the-finance-monkey","status":"publish","type":"post","link":"https:\/\/fotovoltaica.ecrowdinvest.com\/blog\/average-return-of-the-finance-monkey\/","title":{"rendered":"Average return of your investment fund | the monkey and the expert"},"content":{"rendered":"<p dir=\"ltr\">During my final year in college, I remember reading a book called \u201cA Random Walk Down Wall Street\u201d by Burton Malkiel. In the book Burton explains that a blindfolded monkey throwing darts at a newspaper\u2019s financial pages could select a portfolio that would do just as well as one carefully selected by experts. Although it sounds exagerated, there\u2019s is plenty of data showing that very few professional investors can beat the markets consistently over an extended period of time.<\/p>\n<p dir=\"ltr\">In a recently published white paper called \u201cSpanish Fund\u2019s Return. 2002-2012\u201d IESE professor Pablo Fern\u00e1ndez, Javier Aguirreamalloa and Pablo Linaresa proved this again. In the paper they have tracked 1,161 funds over the 10 year period 202-2012, with an average return of 2.7%, which is way below the IBEX35 index (7,86% anually) or \u00a0treasury bonds (4,3%) for the same period. So if we had a monkey throwing darts at the IBEX35 list, most likely we would have better returns than most of those funds and just for the price of peanuts to keep our fund manager happy. Interestingly, average inflation in this period was around 2,7% so at least people have not lost purchasing power.<\/p>\n<p>&nbsp;<\/p>\n<div style=\"width: 310px\" class=\"wp-caption alignnone\"><a href=\"https:\/\/www.joinecrowd.com\/blog\/wp-content\/uploads\/2013\/11\/Monkey-Business.jpg\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.joinecrowd.com\/blog\/wp-content\/uploads\/2013\/11\/Monkey-Business-300x230.jpg\" alt=\"investment funds performance\" width=\"300\" height=\"230\" \/><\/a><p class=\"wp-caption-text\">Monkey Business<\/p><\/div>\n<p>&nbsp;<\/p>\n<p dir=\"ltr\">Out of the 1,161 funds studied, only 37 (3% of total) had higher returns than the IBEX35, and only 178 (15% of total) had higher returns than treasury bonds for this 10 year period. This means that a mere 85% of the funds had lower returns than treasury bonds, although there is more risk holding stocks than treasury bonds. And to complete the picture, only 326 funds averaged returns over 3%, and 54 funds had negative results.<\/p>\n<p>Many studies have concluded that asset allocation explains most of the return of a portfolio: in simpler words, it is more important to make correct decisions in which type of investment to invest (bonds, stocks, &#8230;), than to pick within the same asset class. There are many factors, type of product traded, timing, strategy, knowledge,&#8230; those are always key but make sure your fund\u2019s manager knows them well\u00a0before you end up paying more than peanuts for the service.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>During my final year in college, I remember reading a book called \u201cA Random Walk Down Wall Street\u201d by Burton &#8230;<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[363,383],"tags":[387,385],"nelio_content":{"isAutoShareEnabled":true,"autoShareEndMode":"never","automationSources":{"useCustomSentences":false,"customSentences":[]},"followers":[3],"suggestedReferences":[],"efiUrl":"","efiAlt":"","highlights":[],"permalinkQueryArgs":[]},"_links":{"self":[{"href":"https:\/\/fotovoltaica.ecrowdinvest.com\/blog\/wp-json\/wp\/v2\/posts\/77"}],"collection":[{"href":"https:\/\/fotovoltaica.ecrowdinvest.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fotovoltaica.ecrowdinvest.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fotovoltaica.ecrowdinvest.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/fotovoltaica.ecrowdinvest.com\/blog\/wp-json\/wp\/v2\/comments?post=77"}],"version-history":[{"count":11,"href":"https:\/\/fotovoltaica.ecrowdinvest.com\/blog\/wp-json\/wp\/v2\/posts\/77\/revisions"}],"predecessor-version":[{"id":1488,"href":"https:\/\/fotovoltaica.ecrowdinvest.com\/blog\/wp-json\/wp\/v2\/posts\/77\/revisions\/1488"}],"wp:attachment":[{"href":"https:\/\/fotovoltaica.ecrowdinvest.com\/blog\/wp-json\/wp\/v2\/media?parent=77"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fotovoltaica.ecrowdinvest.com\/blog\/wp-json\/wp\/v2\/categories?post=77"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fotovoltaica.ecrowdinvest.com\/blog\/wp-json\/wp\/v2\/tags?post=77"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}