This post follows on from my previous one, where you may recall that I was worrying about having done something wrong.
So that you don’t necessarily have to read it again, I was discussing the ludicrous scenario where an investor switches, at the start of each year, into the asset class that performs the best over the whole of that year resulting in frankly awesome returns. A scenario, by the way, that had made it into the newspapers.
I chose to ignore this unbelievable scenario. Not unbelievable because of the returns – they’re there for the world to see, but unbelievable because as I pointed out, one has to be either magically psychic to utilise this strategy, or be in a position to influence the world’s financial markets.
My fears about having botched this exercise were not necessarily mistaken: I had done everything right with the data that I had. Let me digress for a moment and point out a couple of things that I didn’t mention.
