Selection bias is everywhere in financial journalism, and for obvious reasons (obvious if you’re in the publishing business). The average reader isn’t interested in a rigorous study of investment track records… yawn. No, the average reader wants sexy stories and profiles of a man (or woman) who beat the odds and delivered stellar returns. Or so it seems, based on a casual review of the usual suspects. I stumbled across another one recently, and it pushes all the obvious buttons. The basic message: the road to uncommonly high returns can be found with an extreme strategy. In this case, the short cut to the promised land runs through a “concentrated” value portfolio that keeps the number of holdings to a minimum and focuses on a select list of securities with the highest expected return. What else do you need to know? Goodbye indexing, so long multi-asset class diversification. They’re done. Now that you have the superior formula, sit back and drink in the success.
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