Unexpectedly High Returns

[william the wie]

A very old system of reducing risk is to hedge with a simple or not so simple system of relative valuation. Bet that the overvalued will sink relative to the undervalued over time. The Dow dogs vs. the high flyers is the simplest system and you can find it at Motley Fool, "Beating The Dow" by O'Higgins and no doubt other places.

You can also use a service such as Value Line or New Constructs. Or crunch a bunch of numbers from EODDATA. Using options dated 3-12 months out reduces risk and increases returns further.

Lately I have been getting unexpectedly high returns because high beta issues have been melting down while low beta issues gave been melting up. I am confused by this anomaly should I attach any meaning to this?

 

[HenryBHough]

Yes!

But only during the early morning hours of the first Sunday of each month in odd-numbered years.

Otherwise it's a crap shoot.

 

[william the wie]

Yes!

But only during the early morning hours of the first Sunday of each month in odd-numbered years.

Otherwise it's a crap shoot.

Actually no, Graham beat the Dow 4 to 1 1926-56 using a similar system and was derided by his intern Warren Buffett for doing so. Buffett has fantasies of doing as well as his mentor.

 

[ashleyjames389]

high risk high return

 

[william the wie]

high risk high return

No, do you know what low beta means?