Post #1295 by elann on the Mechanical Investing board

Investment Strategies / Mechanical Investing

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It looks like there are 7 MI screens that have beaten the market over the past 10 years, with annual returns ranging from 13.3% to 17.5%. These are being tracked at https://discussion.fool.com/t/curated-screens-2024...

That list may be factually true, but the conclusion that many people would draw from it could be a classic Fooled-by-Randomness trap.

If you start with a list of 100 screens, let's say, and rank them by 10 year performance, and the average screen lags the market by 5%, then you will randomly get a few screens that beat the market by a few points and a lot more screens that lag the market by more than 5%. You are virtually guaranteed that, all else being equal, a different set of screens will beat the market over the next ten years.

Elan

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