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A German hamster is outperforming the S&P 500. Mr. Goxx starts his day on a treadmill that selects one of 30 different cryptocurrencies. Once he gets off the treadmill, he has the choice of going through one of two tunnels to go through, one labeled “buy” and the other “sell.” Depending on which one he chooses, the treadmill-selected stock will be bought or sold in €20 ($23) increments. The tunnels are then temporarily locked for 20 seconds to avoid, for example, selling what he just bought immediately after.
As viewers can see live through his Twitch channel, the hamster’s portfolio is up roughly 20% since he began trading in June. While Mr. Goxx may be the first crypto hamster, he’s not the first animal stock picker nor the first one to generate such investment returns.
- Studies from as early as 2012 show how just about any monkey throwing darts at stock pages ends up selecting traditional stock portfolios that also beat the S&P 500.
- A year later, a ginger tabby cat outperformed a group of investment professionals. Instead of using decades of knowledge to pick stocks like the pros, the cat made his picks by throwing his favorite toy mouse onto a grid of numbers assigned to different companies.
Why are animals so “good” at stock picking? In the simplest terms, it’s due to a bias in selection. There are simply more small company options than large ones presented to the animals. This unequal distribution results in selections (even simulated, random ones) of smaller companies. And smaller companies (small capitalization stocks) historically outperform large stocks over the long term. So while the S&P 500 averages a 10% return, animals generate above this in absence of a weighted system.
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Investing, whether in crypto or traditional currencies, is an odd space that both benefits and suffers from the curse of knowledge. Overall, the research shows that the results can be very mixed depending on a number of factors, not to mention the cost of maintaining an animal with its own trading setup and how slowly these picks occur. Experts basically say: Don’t let animal trading necessarily dictate your own strategy!
- Vice (Where we found this story) 10 days old | 3 minutes long
- Forbes Monkeys beating S&P 9 years old | 6 minutes long
- The Guardian Cat versus professionals 8 years old | 4 minutes long
- Journal of Portfolio Management Dense report on animal stock trading 8 years old | 33 minutes long
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My investing strategy today? Go ham(ster)!
Art Credit: ascii.co.uk