BillNL

Are Index Funds the Only Rational Choice?

One thing I'd like to see is how often "intelligently selected" 15-stock portfolios with risk similar to the S&P 500 actually outperform the index. It should be possible to backtest this using QPP. One of Bernstein's points was that it is difficult to beat the terminal wealth value of the index over a given period of time (eg. 10 years) because the performance of the index is largely driven by the small minority of big-gainers in the index. Unless you manage to include one or more of them in your 15-stock portfolio you are likely to underperform the index itself. I don't see how that is easily accomplished by selecting 15 stocks based only on quantitative characteristics such as low intercorrelations and aggregate risk.