Post #747 by Mark19 on the Mechanical Investing board

Investment Strategies / Mechanical Investing

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The most interesting thing I find from these exercises is how the dartboards did relative to a cap weight portfolio in the same interval, measured the same way.
If you do 100 dartboard portfolios, (and control trading costs at modern low-cost levels), how many outperform cap weight?
One study I read quoted 99 for their test.
The figure will likely vary based on whether you're considering the S&P 1500 or 500 or whatever.
In GTR1 you'd have to add something like a "marketcap > 0" step in the dartboard test, so make sure the same set of fields is populated and you get the same universe of eligible stocks.

I understand that in theory cap weighted indexes are awful. The most overvalued stocks take up most of the index. But in practice, they work all to well. The s and p 500 index has beaten our screens, beats almost all newsletters, beats actively managed funds and beats rsp. VOO has a five star rating due its amazing performance. RSP has a 2 star rating.

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