Numerous academia and literature have impressed upon us that active investors like us cannot beat the index. This large no. of academia and literature cannot be wrong. Nevertheless, after reviewing the returns of the Straits Times Index (STI) over the past 26 years, I have an inkling that we might be able to beat the index after all.
Over the past 26 years from Jan 1988 till Nov 2013, the returns of the Dow Jones Industrial Average, Standard & Poor’s 500, Nasdaq Composite and Hang Seng Index have averaged (computed as geometric average) about 8.5%, 7.8%, 10.0% and 9.3% respectively. The returns of STI, in contrast, averaged about 5.0%, similar to FTSE’s return of 5.2%. The only index among those studied that performed worse than STI is the Nikkei index, which returned -1.6%. At a return of 5.0%, it should not (Read more…)