

Scott Adams startup idea: find unique diversified stock baskets - andreyf
http://dilbert.com/blog/entry/the_most_valuable_information_in_the_world/

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joshu
Eh. Flimsy logical reasoning. "X would nearly mimic Y" in paragraph 1 becomes
"X is the same as Y" in paragraph 2.

You want a very broad basket of stocks. The broader, the better to minimize
risk. The SPX already is a subset replacement for "the market" in general (500
vs 9000 stocks.)

Sure, you can approximate with a smaller set, because everything is inter-
correlated. Except when it's not (earnings data in an individual stock, etc.)
The other issues here are: market cap (some stocks are MUCH bigger than
others); trading impact (just because a stock trades some way doesn't mean you
won't move it by investing in it, etc) and so on. And at the end of the day,
you're just mimicing the SPX. You can get SPX performance for a lot less
effort. Even SPDRs are only 18 bps of management fee.

Finally, the point of the fancy finance that he rails against is that people
aren't looking to duplicate the SPX, they are looking to beat it. It can be
done.

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nradov
It wouldn't work very well for small investors. Even with a discount broker,
trading costs for periodic purchases and rebalancing will end up being about
as much as fees for a low-cost index fund like VFINX.

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alecco
After loosing recently a good chunk of hard earned money following Scott
Adam's financial advise I'm staying clear of his new ideas.

Sure I didn't pay much in commission but index tracker funds were a very
stupid bet and just having an inflation plus simple savings account was many
times better. Luckily I didn't go bold on this.

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p0ltergeist
uh, yeah, we call it the ETF industry.

there are ETFs for every risk tolerance of every global stock market,
commodity, bond, etc etc etc. there are even ETFs of ETFs

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stakaka
Don't all ETFs include some kind of management fees? I usually see fees of at
least, say, 0.20%. His idea would eliminate that.

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p0ltergeist
the etf management fee is much less than you would pay on trading charges to
individually transact even a small number of positions aggregated in any etf

the only other route is vanguard which tends to have low fees for index funds

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andreyf
This should be pretty easy, given a data set of historical stock prices - I
can't seem to find one though... what am I missing?

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mrtron
If historical prices were any indicator of future performance every software
developer with some simple AI knowledge would be a trillionaire :)

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andreyf
Historical prices are a good indicator of which stocks are dependent and which
are independent, no?

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Dilpil
Scott Adams lives in a world without transaction fees.

