A 100-Year Backtest That Beats The Market By Far
A 100-Year Backtest That Beats The Market By Far
A simple ratio used by the best investor in history to beat the market
It is very easy to test an investment strategy by looking in the rear-view mirror or backtesting. Generally, these backtest are done with very high overfitting, this means that the parameters chosen at the time of selecting the stocks and the time of holding them in the portfolio are so specific that obviously, that trend will not give the same returns over time. In addition, most of these models are made on a specific period of history, as they would not have worked in any other period of time of the economic cycle.
But, what would you say if it is possible to backtest a single parameter that clearly beats the index for over 100 years?
Mark Spitznagel, one of the best investors, if not the best, has managed to find such a parameter and has used it to bring an average annual return or CAGR of over 70%. If you want to know more about him and the principles of his investment philosophy, you can read the following article.
To achieve these returns Spitznagel…