The Best of Market Sentiment 2023
Our most popular articles and personal favorites of 2023
As we wrap up 2023, we wanted to say a heartfelt thanks to all of you for reading, sharing, and supporting our work. Your comments, shares, and emails have not only kept us going but have made this whole thing fun. We truly believe the best is yet to come.
We published 70+ articles this year, which were read more than 2 million times 🤯, and we wanted to pick a few that we enjoyed writing and resonated with you.
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If the market benchmark (S&P 500) is based on “buy the biggest companies that are profitable”, shouldn’t we be able to do better by just going one or two steps deeper?
Over a rolling 10-year period in the U.S. from 1926 to 2018, value stocks have beaten growth stocks 84% of the time.
"A truly great business must have an enduring moat that protects excellent returns on invested capital" - Warren Buffett
Over the last 60 years, on a 10-year rolling period, small-cap stocks beat large-cap stocks 73% of the time!
Do investors benefit from the Lindy Effect?
To test this, we evaluated the performance of 70 companies that were 100+ years old and benchmarked it to the S&P 500.
Here are the results:
Over the past 16 years, family-owned businesses have generated 112% alpha over non-family-owned businesses.
So, if you want to invest your hard-earned money, why wouldn’t you invest it with owners running the company who are in the same boat as you?
Research made actionable
Where do millionaires invest their money?
One of the most overlooked aspects of investing is Shannon's Demon: Using it, we can consistently generate positive returns from two uncorrelated assets that have zero expected long-term returns.
Consider a Japanese worker who started working in 1980. Assuming a 30-year career & $1K annual investment into Nikkei 225, by the time he retired in 2010, the $30K invested would have turned into $20K. A -31% return over 30 years.
The Total Bond Index lost more than 13% in 2022 making it the worst year on record going back 250 years.
Aggressive Fed action has created one of the best buying opportunities for bonds. Here is everything you need to know to add bonds to your portfolio:
Should your portfolio be 100% stocks?
As of Dec'23, all companies in the magnificent 7 list have outperformed the market by at least 2x and the S&P 500 equal weight index by 4x.
Portfolio Deep Dives
Successful investing comes down to just three core principles: diversification, low costs, and discipline. By investing in a diversified portfolio of low-cost funds and sticking to a long-term horizon, individual investors can achieve excellent long-term returns without taking on unnecessary risk.
During the dotcom crash,
S&P 500: - 45%
60|40 Portfolio: -20%
The Cockroach portfolio: -5%!
Everything you need to know about the Cockroach portfolio
A simple 3-fund portfolio beat ~83% of 5,000 randomly selected, comparable, actively-managed funds during a 16-year window.
Is right now one of the best times to get into the 60/40 portfolio?
P.S – We posted this on Mar'23. Check the performance of 60/40 now ;)
It took Ray Dalio and his team more than 25 years to perfect the All Weather portfolio.
During the Covid-19 crash when the S&P 500 was down 20%, the All Weather portfolio was down only 1%!
Here's the definitive guide to building an All Weather portfolio:
Just for fun
‘Cause if you are not having fun, what’s the point:
Jim Cramer made an incredible 21,653 stock picks in the last 7 years. The 24% CAGR claim for his Hedge Fund was never independently verified.
Cramer's own portfolio has underperformed the S&P 500 since its inception!
Here is how his stock picks fared:
Motley Fool Stock Advisor has given ~3x the returns of the S&P 500 since its inception in 2002. But,
- Are a few companies driving all the returns?
- Did they "beat the market" risk-adjusted?
- What if you had started late - say in 2011 or 2015?
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