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The math, at least when it comes to the Medallion Fund, says that you are wrong. The odds of being able to achieve 40%+ returns (net of very steep fees) over 20+ years are astronomically low. In fact, the odds of simply being in the top 25% of hedge funds for 20 straight years, through “randomly picking stocks” as you put it, are 1/(4^20), which is roughly 1.09 in 1 trillion. There have been less than 25,000 hedge funds in US history.

Yours is the kind of folksy explanation that appeals to the masses. It seems like the kind of thing Bernie Sanders would say in a speech. But in this case it leads to an astoundingly inaccurate conclusion.




This is the correct response.

For whatever reason, people seem to think "50/50 chance of beating the market" = 50% chance of generating 40% return on any given year.

Try randomly picking stocks over the last 20 years, and run 1 billion simulations and see if you get anywhere near that (even letting you have survivorship bias for free)


> people seem to think "50/50 chance of beating the market" = 50% chance of generating 40% return on any given year

Yeah, quants like to coyly say they're figuring out where pennies might drop, and then they bring in leverage. Without the leverage, they'd be beating the market by less than a percent in so many cases.




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