{"id":29400,"date":"2012-05-01T13:37:49","date_gmt":"2012-05-01T17:37:49","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/2012\/05\/how-an-investment-portfolio-of-9-rappers-beat-the-market\/"},"modified":"2012-05-01T13:37:49","modified_gmt":"2012-05-01T17:37:49","slug":"how-an-investment-portfolio-of-9-rappers-beat-the-market","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/05\/01\/how-an-investment-portfolio-of-9-rappers-beat-the-market\/","title":{"rendered":"How an Investment Portfolio of 9 Rappers Beat the Market"},"content":{"rendered":"

Article by Investment U<\/a> <\/p>\n

\"How<\/p>\n

I\u2019m going to demonstrate a few key principles of investing using randomness\u2026 Including how it trumped the performance of the S&P 500 by five-fold.<\/p>\n<\/div>\n

\u201cThe game is rigged\u2026\u201d <\/em><\/p>\n

That\u2019s the lament from a lot of investors over the last few years.<\/p>\n

I feel for the people who share that view. It means they got burned\u2026 And probably pretty bad.<\/p>\n

But the sad reality is they more than likely got burned because they made mistakes. They either over-leveraged themselves, they didn\u2019t do their research, they took some bad investment advice from someone, and ultimately didn\u2019t have an exit strategy or plan.<\/p>\n

It\u2019s an unfortunate situation. Though an avoidable one.<\/p>\n

Small investors still have yet to enter the market in any significant numbers. They\u2019ve been sitting on the sidelines for years, happy to gain a fraction of a percent interest in their money market accounts in lieu of taking a chance in stocks. They\u2019re scared away by the volatility or flat returns of the broader markets\u2026 They believe it\u2019s rigged.<\/p>\n

But the fact of the matter is, none of that really matters.<\/p>\n

A \u201cNotorious\u201d Portfolio That Beat the S&P<\/strong><\/h2>\n

Ask any finance or economics professor and they\u2019ll tell you flat out randomness can\u2019t outperform the market\u2026 At least not consistently.<\/p>\n

Well, I\u2019m going to demonstrate a few key principles of investing<\/a> using randomness\u2026 Including how it trumped the performance of the S&P 500 by five-fold.<\/p>\n

I began this experiment early in 2011. It was just a silly experiment that came up in conversation around the office. And the portfolio I created became some what notorious.<\/p>\n

To start, all I needed was a way to randomly select companies.<\/p>\n

I could blindfold myself and lob darts at the stock pages\u2026 I could randomly type letters into a terminal\u2026 I could draw letters out of a Scrabble bag… But none of those seemed like much fun.<\/p>\n

So, what I decided was I needed a system that was built on two-, three- and four-letter words. I chewed on this for a while, and decided there was no better basis for my experiment than this ground-breaking idea: Using the names of hip hop artists and rappers as ticker symbols.<\/p>\n

It\u2019s kind of perfect since there are a number of artists in the genre who use short, bite-sized names. I scooted over to the Wikipedia list of “Rappers” and started typing in names. Whenever I got a hit, I added that company to the portfolio.<\/p>\n

Thus was born, the infamous \u201cHip Hop Portfolio\u2026\u201d<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Company<\/strong><\/td>\nSymbol<\/strong><\/td>\nEntry Date <\/strong><\/td>\n\u00a02011 Total Return<\/strong><\/td>\nMusician<\/strong><\/td>\n<\/tr>\n
Duke Realty<\/td>\nDRE<\/td>\n1\/3\/2011<\/td>\n-.024%<\/td>\nDr. Dre<\/td>\n<\/tr>\n
Telecom Italia<\/td>\nTI<\/td>\n1\/3\/2011<\/td>\n-14.07%<\/td>\nT.I.<\/td>\n<\/tr>\n
Grupo Aeroportuario Del Pacifica<\/td>\nPAC<\/td>\n1\/3\/2011<\/td>\n-14.41%<\/td>\nTupac<\/td>\n<\/tr>\n
Deltic Timber<\/td>\nDEL<\/td>\n1\/3\/2011<\/td>\n2.71%<\/td>\nDel the Funky Homosapien<\/td>\n<\/tr>\n
Bob Evans<\/td>\nBOBE<\/td>\n1\/3\/2011<\/td>\n4.38%<\/td>\nB.O.B.<\/td>\n<\/tr>\n
EV Energy Partners<\/td>\nEVEP<\/td>\n1\/3\/2011<\/td>\n75.25%<\/td>\nEve<\/td>\n<\/tr>\n
Big Lots<\/td>\nBIG<\/td>\n1\/3\/2011<\/td>\n24.17%<\/td>\nThe Notorious B.I.G.<\/td>\n<\/tr>\n
Mosaic Company<\/td>\nMOS<\/td>\n1\/3\/2011<\/td>\n-33.67%<\/td>\nMos Def<\/td>\n<\/tr>\n
IntercontinentalExchange<\/td>\nICE<\/td>\n1\/3\/2011<\/td>\n1.18%<\/td>\nIce Cube\/Ice T<\/td>\n<\/tr>\n
Combined Total Return<\/em><\/strong><\/td>\n <\/td>\n <\/td>\n5.09%<\/strong><\/td>\n <\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

As you can see, the outcome was actually pretty spectacular. (I fully plan on copywriting and patenting this portfolio into a Hip Hop ETF\u2026)<\/p>\n

But not only could I pull from old school, new school and underground artists \u2013 the portfolio itself ended up with a level of diversification<\/a> that’s pretty amazing. Some of the companies are very solid, though admittedly a few were oversold in 2011.<\/p>\n

Here\u2019s the crazy part: The S&P 500 had a terrible year last year. Its return for 2011 was a mere 0.97%. The Hip Hop Portfolio returned a hair over 5%.<\/p>\n

That’s not really spectacular, but it was at least positive. And it was five times the performance of the S&P.<\/p>\n

So What\u2019s The B.I.G. Deal?<\/strong><\/h2>\n

Keep this is mind every time you hear some market bear or anti-equity guru mention that the stock market returns over the last several years have been basically flat or negative. They\u2019re talking about the indices.<\/span><\/p>\n

Well, we don\u2019t typically invest in broad indices (and if you do, we recommend Alexander Green\u2019s full Gone Fishin\u2019 Portfolio<\/a>).<\/p>\n

At Investment U<\/em>, we recommend investing in a diverse mix of individual, fundamentally sound companies.<\/p>\n

If five of the randomly selected companies in The Hip Hop Portfolio outperformed the S&P, imagine what your performance looks like with actual technical and fundamental analysis\u2026<\/p>\n

Good Investing,<\/p>\n

Matthew Carr<\/p>\n

\n<\/img><\/a> <\/img><\/a> <\/img><\/a> <\/img><\/a> <\/img><\/a>\n<\/div>\n

<\/p>\n

Article by Investment U<\/a> <\/p>\n","protected":false},"excerpt":{"rendered":"

Article by Investment U I\u2019m going to demonstrate a few key principles of investing using randomness\u2026 Including how it trumped the performance of the S&P 500 by five-fold. \u201cThe game is rigged\u2026\u201d That\u2019s the lament from a lot of investors over the last few years. I feel for the people who share that view. It … <\/p>\n

Continue reading “How an Investment Portfolio of 9 Rappers Beat the Market”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-29400","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/29400","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/comments?post=29400"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/29400\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/media?parent=29400"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/categories?post=29400"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/tags?post=29400"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}