"God, you're an idiot. Why are you down 80% like everyone else? ... You're fired!"
Dr. Wes Gray shocked the crowd last week at our Stansberry Conference in Las Vegas... pretending to call out God as a seemingly bad investor.
Now, Wes might not know as much as God about investing... But he knows what works in investing better than just about anyone. He has a PhD in finance from the University of Chicago, where he studied under Nobel Prize winner Eugene Fama.
He told the Vegas crowd that – even with perfect foresight – God would have lost them 76% of their money. "Even God cannot destroy risk," Wes explained.
Let me show you what he found...
Specifically, Wes tested how you would have performed as an investor if you had perfect foresight... if you could know exactly – in advance – what the best-performing stocks over the next five years would be.
Wes called this "God's Portfolio" – the 10% of stocks that will be the best performers over the next five years. He tested this strategy going all the way back to 1927. Here's exactly how he explained it in Vegas:
I'm going to buy the stocks that we know outperform the highest, and beat the markets by the most, five years from now. So it's a total "cheating" strategy.
It's the perfect investment strategy. Over 90 years, this portfolio compounds at 30% compound annual growth rates – which is three times the S&P .
The returns are, of course, "crazy good." And that makes sense. It is, by definition, the best-performing stock market strategy.
It is the perfect stock portfolio – since you already knew in advance these would be the best-performing stocks over the coming five years.
The gains from this strategy are extraordinary, as you would expect. What's surprising are the losses...
God's Portfolio, as Wes defined it, would have experienced a 76% drawdown during the Great Depression. And there were many other big losses – including a drawdown of about 45% around 2008.
As Wes said in so many words: Even with God's perfect foresight, chances are you would have fired God as your broker.
Stocks are risky. Stocks are volatile. "Even God cannot destroy risk," Wes says. Don't ever forget it...
"Adding an appropriate amount of risk to your investments greatly improves your portfolio performance," Dr. David Eifrig writes. But unfortunately, many investors don't fully understand their risk tolerance. Get started in three simple steps right here.
"If stocks drop 30%... are you going to be OK?" Austin Root asks. This question speaks to your own risk tolerance – and how you invest should depend on your answer. Learn more here: Why You Should Invest for 'All-Weather Protection' Today.
As investors, we want to participate in the upside potential when it's there – and hedge the downside risk when it's there...
HIGHS AND LOWS
NEW HIGHS OF NOTE LAST WEEK
Disney (DIS)... theme parks, movies, more
Apple (AAPL)... "shareholder friendly" giant
Microsoft (MSFT)... "digital utility"
Cisco (CSCO)... Internet "plumbing"
Nvidia (NVDA)... graphics processing units
HP (HPQ)... computers, printers
Intuit (INTU)... TurboTax, QuickBooks
Automatic Data Processing (ADP)... payroll processor
Danaher (DHR)... science and technology
Thermo Fisher Scientific (TMO)... science and technology
Eli Lilly (LLY)... prescription drugs
AstraZeneca (AZN)... prescription drugs
Merck (MRK)... prescription drugs
Boston Scientific (BSX)... pacemakers, catheters, stents
UnitedHealth (UNH)... health insurance
Ingersoll Rand (IR)... manufacturing
Emerson Electric (EMR)... manufacturing
Canadian Pacific Railway (CP)... railroads
Boeing (BA)... "offense" contractor
Continental Resources (CLR)... oil and gas
Marathon Oil (MRO)... oil and gas
Vale (VALE)... iron ore
Cameco (CCJ)... uranium
CF Industries (CF)... fertilizer
Mosaic (MOS)... fertilizer
NEW LOWS OF NOTE LAST WEEK
Anheuser-Busch InBev (BUD)... beer
British American Tobacco (BTI)... tobacco
Snap (SNAP)... "cocktail party" stock
General Motors (GM)... Big Three automaker
KB Home (KBH)... homebuilder
Toll Brothers (TOL)... homebuilder
Sears Holdings (SHLD)... department store