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What if a stock broker made all of their investment decisions using a Magic 8-ball?

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Well, that might explain a few things!

Firstly, it is worth saying that our posts are most commonly about saving or carefully managing money. This one is a little bit different.

UPFRONT WARNING: Do not try this at home with real money and this definitely does not constitute investment advice!!

Investing in the stock market can be seen as a pretty dull and complicated area. That is unless you are making lots of money and then it is probably more exciting for you than it is for anyone else. Investment in general could definitely do with a bit of an image rebrand.

As a social experiment I’ve created a fictional investment portfolio with a difference. It’s bugged me for a long time that investors have very limited information and even when they do have information to help make decisions, the market can be irrational and unfathomable.

So, I’m trying out a theory…

What if investments were made randomly, leaving the success of investing purely down to chance? There would be no bias, no agonising over what and when to buy and sell. Blissful ignorance and hopefully some sort of investment return.

It might be a fundamental flop, but I think it will be interesting to see how it goes.

This is how it is going to work:

  • Shares in companies from the FTSE 350 will be selected at random and presented to the Magic 8-Ball
  • Only shares with a positive response from the classic soothsaying toy will be accepted, such as “You may rely on it” or “Signs point to yes”
  • Vague or negative responses will result in the company being rejected from the portfolio
  • A fictional £10k will be invested, initially split evenly between 10 different companies
  • At the end of each week, the Magic 8 Ball will be asked whether the investment in each company should be retained
  • A negative response will result in it being sold at that point and a new candidate selected at random to take its place, investing the proceeds from the sale in the new company

That’s it! Simple and hopefully fun to see how the portfolio does.

I will be blogging about the results regularly so you can see how we get on.

Day 1 results — £53.27 gain (0.53%) — which doesn’t sound like much, but this is compared with a 1.08% decline in the FTSE 350 index for the day at the time of checking.

Therefore, it might be early days, but indications are positive!! Big winners in the portfolio today (Renishaw, Countryside Properties and Stobart), offset by poor performance of Ultra Electronics.

Picture credit: Adam Zygus for the cartoon

Other credit: The “Magic 8-Ball” is a registered Trademark of Tyco Inc. We love this toy and would never claim the name or concept as our own, instead we are using it as it was intended, to help make decisions! Thank you muchly Tyco 🙂



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