Ultimate Cheatcode to beat the market
I have thought long about this. Now I decided to share one of my biggest investment strategies, which has proven to beat the market over the long term.
*Imagine you can easily outperform the market by just picking a handful of stocks from a list that updates itself. And you don't even need to understand the business.The list is the S&P500 and stocks are the top 5 largest of the list. That's it!*
**Strategy**:
Buy the top 5 largest company by market cap from the S&P500 and hold it for a long term. If the stock is no longer among the top 5, sell it and buy the other one. (If the no #5 largest stock became no #6 and another stock becomes the new no #5).
**Background:**
I and my investing partner made backtesting of that strategy and it mostly works. It actually works too if you pick the top 3 stocks instead of 5. It even works if you only pick only the no #1 largest stock and replace it once another stock becomes the new no #1. We did backtests of all three scenarios and all beat the market if you're invested for at least for 3 years. Why so long? Often there are still a one year period, in which it underperformed the market just to beat it next year. Backtests also confirmed that volatility will become greater. I can show you tons of numbers about the actual performance, but they vary greatly depending one the time frame in the past we choose. And this sub doesn't support images or videos. And that's not all just theory. Three of my friends are doing this for years and beat the market. They're neither smart nor talented.
**Reason:**
It wouldn't be value investing if I didn't explain the reason why it worked, besides it's long term investing. (Sorry for the daytraders here). Frankly said: I don't really know. But I have assumptions. The largest companies in the world have such high valuation for a reason. They have proven to grow strong in the long run and Mr market has rewarded them. Of course the top largest companies today will definitely not the same 5 largest companies in the future. Did you know that Coca Cola was the No #1 for a very long time? Then Exxon becomes the no 1, before Apple and Nvidia took the crown. And with that strategy we always have the winners.
Funny enough: To describe the full strategy in written form it would be smaller than "The little book that beats the market". Yes we already read it.