You would have also very strongly outperformed the S&P 500. That is quite good.
When you backtest stock picks against SPY, you usually want to compare that portfolio to holding SPY levered to the same volatility (or just compare Sharpe ratios). Having a higher total return might mean that you picked good stocks, or it might just mean that you took on more risk. People generally care about return on risk rather than return on dollars, since sophisticated investors can take on ~unlimited amounts of leverage for sufficiently derisked portfolios.
In this case, the portfolio has a Sharpe ratio of 2.0, which is indeed pretty good, especially for an unhedged long equity portfolio, so props to NoahK! (When I worked at a hedge fund, estimated 2 Sharpe was our threshold for trades.) But it’s not as much of an update as 60% annual return would suggest on the surface.
That is… OK. Honestly, also looking at the composition of this index fund, I am not very impressed. Making only a 12% return in the year 2024 on AI stocks does feel like you failed at actually indexing on the AI market.
IRBO’s Sharpe ratio is below 1, which is pretty awful. In my not-financial-advice-opinion, IRBO is uninvestable and looking at the top holdings at the time of this interview was enough to recognize that (MSTR is basically a levered crypto & interest rate instrument, SPLK was a merger arb trade, etc.).
When you backtest stock picks against SPY, you usually want to compare that portfolio to holding SPY levered to the same volatility (or just compare Sharpe ratios). Having a higher total return might mean that you picked good stocks, or it might just mean that you took on more risk. People generally care about return on risk rather than return on dollars, since sophisticated investors can take on ~unlimited amounts of leverage for sufficiently derisked portfolios.
In this case, the portfolio has a Sharpe ratio of 2.0, which is indeed pretty good, especially for an unhedged long equity portfolio, so props to NoahK! (When I worked at a hedge fund, estimated 2 Sharpe was our threshold for trades.) But it’s not as much of an update as 60% annual return would suggest on the surface.
IRBO’s Sharpe ratio is below 1, which is pretty awful. In my not-financial-advice-opinion, IRBO is uninvestable and looking at the top holdings at the time of this interview was enough to recognize that (MSTR is basically a levered crypto & interest rate instrument, SPLK was a merger arb trade, etc.).