Great work. Although all very backword looking. In the end price would be determined by future developments and while past provides some gudiance to it, the predictive value is very small in my opinion.
You are right. If there was a way for me to know what the future compounding rates will be, I would be a billionaire long ago. So, I am stuck with backward-looking insights. :)
Seriously though, the data will almost definitely be wrong for *every single company* for *every year* in the future, if taken in isolation. However, collectively, and over long periods of time, the portfolio should more or less behave similar to the past, unless there is inflection in some businesses.
With a 50 stock portfolio spread across sectors and geographies, the hope is that the negative inflections will be matched by positive inflections, but that is just pure conjecture. You can, again in theory, be left the worst of the negative inflections and none of the positive inflections. That's the worst case scenario.
This entire work is based on the premise of "all models are wrong, some will be useful." - I am hoping this model will be useful. I plan to assiduously track my own portfolio against the benchmark to know how it is performing. If there is prolonged and significant underperformance, then it would be a good indication that this model was less useful than anticipation.
Great work. Although all very backword looking. In the end price would be determined by future developments and while past provides some gudiance to it, the predictive value is very small in my opinion.
You are right. If there was a way for me to know what the future compounding rates will be, I would be a billionaire long ago. So, I am stuck with backward-looking insights. :)
Seriously though, the data will almost definitely be wrong for *every single company* for *every year* in the future, if taken in isolation. However, collectively, and over long periods of time, the portfolio should more or less behave similar to the past, unless there is inflection in some businesses.
With a 50 stock portfolio spread across sectors and geographies, the hope is that the negative inflections will be matched by positive inflections, but that is just pure conjecture. You can, again in theory, be left the worst of the negative inflections and none of the positive inflections. That's the worst case scenario.
This entire work is based on the premise of "all models are wrong, some will be useful." - I am hoping this model will be useful. I plan to assiduously track my own portfolio against the benchmark to know how it is performing. If there is prolonged and significant underperformance, then it would be a good indication that this model was less useful than anticipation.