No. of Recommendations: 0
“ The lesson from his study would seem to be to stay invested in the market and let the winners run,"
This has been the investing mantra since at least 1837.
"David Richardo, a trader who accumulated a fortune the early 1800's. This quote in a book written in 1837 captures two golden rules of trend following.
Cut short your losses, - let your profits run on."
Yet a cap-weighted index will have you buying more overvalued stocks and less undervalued stocks.
There is no evidence at all that this is correct. No evidence that the largest cap stocks are overvalued and the lowest cap stocks are undervalued.
This is kind of like the erroneous strategy of buying stocks that have fallen farthest from their 52 week high because "they have nowhere to go but up".
