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Hindsight Is The Perfect Investment Tool

I got bounced the table below the other day for comment which is interesting because my comments are generally so what. I have no idea where it came from so cannot vouch for its veracity. So treat it with the usual caution you apply to something you have not generated yourself.

Asset comparison

I am not certain what the value of such tables is unless it is to convince us all to put our energies into investing a time machine so that we can go back in time and load up on Bitcoin, although this in the manner of all paradoxes would probably remove the value of the event. However, the table does serve some instructional value in that it only tells part of the story – so I have redone the chart and added in the MaxDD for each instrument over this time frame.

r2

For shits and giggles I have also added to the table the total Division One Prizes for Powerball since 2010, as you can see it is a very tidy sum. There are two issues that need to be addressed. The first is the obvious statement that the past is not the future. The failure to understand this is a mistake I used to see brokers make all the time. Periodically our research department would produce a list of the best performing stocks on the ASX, the dealers would then be encouraged to get on the phones and sell these stocks on the basis of what they had done in the past. Clearly this reflects a breach of the past is not the future doctrine and is something that is even reflected when performance results are presented to retail investors. These investors are constantly warned that past results may not be reflected in future results and this is a reasonable warning.

The other point that needs to be made about this sort of table is that the trajectory of the price of an instrument in obtaining those returns needs to be considered. You have to ask yourself whether at any pint during your investment in Bitcoin whether you could stomach an 80% drawdown. My guess is that most would not be able to hang on through this sort of event, even if they were informed that price would recover.

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