The dartboard portfolio re-visited

Here is the bottom line for this blog:

If the pros tried to select the worst-performing stocks, their results would be similar when compared to their efforts to select the best-performing ones!

They would be in the same league as Princeton professor Burton Malkiel’s dart-throwing monkey. As unbelievable as it is charming!

Much of what you see below is from our March 12, 2018 blog.

Prof. Malkiel’s idea is based on Eugene Fama’s Efficient Market Hypothesis which states that stock prices reflect all known information (see chapter 1 of the Monday Morning Millionaire book) therefore they move randomly and unpredictably. The concept was Fama’s 1960 Ph.D. thesis1 for which he received the  2013, Nobel Memorial Prize in Economic Sciences. 

The details of the efficient market hypothesis have been debated by academics and respected professional investors ever since its initial publication. Nevertheless, most of them accept it, albeit with some caveats and reservations arising from investor psychology. Most agree that it is exceedingly unlikely that, over the course of decade or more, you or I or the “pros” could build a stock portfolio that would outperform the market, the market being represented by a low-cost, broad index exchange-traded fund (ETF) as shown in the chart below.There isn’t a single evidence-based study that shows that professionals can effectively build a portfolio or time buy/sell orders to beat such an ETF.

Fama’s 2012 study with Kenneth French confirmed this view, showing that the distribution of returns of US mutual funds is very similar to what would be expected if no fund managers had any skill—a necessary condition for the EMH to hold.2

For more detailed explanation of the EMH, check the wikipedia and investopedia pages.

Evidence-Based Findings

S&P500 index ETF, symbol SPY

The results that the pros get and their ability to get returns better than those shown in the above chart have been thoroughly examined in the literature.3,4,5,6 The published papers report that the pros cannot get better results than simply buying and holding a market index exchange treated below – the Monday Morning Millionaire Program philosophy.

The pros disagree violently, of course, entirely in line with Upton Sinclair’s memorable statement that “it is difficult to get a man to understand something when his salary depends upon his not understanding it.” Or a woman, as well.

The pros are well trained, well motivated and well equipped but facts are facts. So yes, they can equal the results shown in the above chart (many pros have been accused of being closet indexers), but they do need to buy groceries and pay the rent. Their compensation needs to be subtracted from the results they get. And what do we get?

Gaining A Year’s Retirement Income; Easily Beating Pros with Mathematical Certainty

When the pros’ fees, commisions, upselling and incentives are subtracted from portfolio performance it is a mathematical certainty that self-directed investors will beat the professionals and save a year’s retirement income.  Supported by the Monday MorningMillionaire Program, they can do so in less than half an hour a week.


  1. Fama, E. F. (1965). “The Behavior of Stock-Market Prices” The Journal of Business 38, No. 1, pp. 34-105 The University of Chicago Press
  2. Fama, E. F.;French, K. R. (2012). “Size, value, and momentum in international stock returns” Journal of Financial Economics. 105 (3): 457, doi: 10.1016/j.jfineco.2012.05.011
  3. Rompotis, Gerasimos Georgiou, “Active vs. Passive Management: New Evidence from Exchange Traded Funds” (February 4, 2009). Available at SSRN: or
  4. Blake, C.R., Elton, E.J. and Gruber, M.J., 1993, “The Performance of Bond Mutual Funds”, Journal of Business 66 (3), pp. 371-403.
  5. Malkiel, B.G., “Returns from Investing in Equity Mutual Funds 1971 to 1991”, Journal of Finance, 1995 50 (2), pp. 549-572.
  6. Gruber, M.J., 1996, “Another Puzzle: The Growth in Actively Managed Mutual Funds”, Journal of Finance 51, pp. 783-810.


Dr. Milan Somborac

The Monday Morning Millionaire Program supports do-it-yourself (DIY) investors which I have been for over 50 years. About my team and me

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