Thursday, January 06, 2011

Are the Stocks not to Own, the Ones to Own?

Great column from the WSJ $$ on the “Pros” picks, and how they do compared to the SP500 and the least favorite stocks.

imageIf you had started with $10,000 at the start of 2006, invested $1,000 in each stock and reinvested any dividends, today you'd have $10,950. That's before trading costs and taxes.

But if you had just ignored Wall Street analysts, put that money in the S&P 500 exchange-traded fund—which tracks the entire Standard & Poor's 500—and left it alone, you'd have $11,190: slightly more. And you'd have saved a lot on trading costs and capital-gains taxes as well. Overall, you'd have ended up considerably better off.

As for the unpopular stocks? Thanks to survivorship bias, we can't be completely certain. But if you'd just bought the most-hated 10 stocks (in today's S&P) each year you'd have an astonishing $16,430 today.

That's in just five years.

That beats the most-popular list, and the index, hands down.

So, what do you think?  The article gives the Top Ten and the Bottom Ten.  Choose wisely.  Or choose the index!

Chasing performance is a tough gig.  Just ask the Lakers Girls!

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