One year ago, I responded to an idea on Twitter that we should test how portfolios of stocks selected completely at random would do compared with a broader benchmark. I then created five random portfolios of 30 stocks each, equally weighting random selections from the Russell 3000 index, all on Folio. Not surprisingly, these portfolios all had a tilt towards smaller cap and higher volatility stocks, but I am surprised that all five outperformed so significantly over the past year, especially the way #3 did. These tilts towards smaller and more volatile stocks also explain why these deviate from the Russell 3000 by far more than the two 5-stock portfolios I tested deviated from the S&P 500 index.
Below are the charts of the 1-year performance of these 5 random portfolios as calculated by Folio, with no further comment. Past performance is no indication of future results.
