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Graham Stephan - HOW TO MAKE EASY MONEY IN THE STOCK MARKET

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Author: Graham Stephan
Categories: Personal Finance
Tags: finance
Views: 2 · Last viewed: 2026-10-16 03:07 UTC

Short Summary

Main recommendation: Graham Stephan's video argues that the best approach for most investors is to put money into a broad index fund tracking the overall market and do nothing else, because the monkey-picked stock experiment gained more returns but with much higher volatility and risk, according to the speaker's own experiment and reasoning. He tested this by having a monkey named Boo pick 10 random stocks from a pool of 30 randomly selected from the top 1,000 US public companies, investing $10,000 in each, which returned about 41% in one year versus 28% for the S&P 500.

Key Points

  • The experiment was inspired by economist Burton Malkiel's quote that a blindfolded monkey throwing darts at a newspaper's financial pages could pick a portfolio that does as well as one chosen by experts.
  • A 1988 Wall Street Journal test found random dart-picked stocks beat professional stock pickers in about 40% of six-month trials over 14 years, and a separate study covering 1964 to 2010 reported random portfolios beat the market by an average of 1.7% a year, 96% of the time, as the speaker describes it.
  • The speaker cites research claiming randomly selected portfolios tend to include smaller stocks, which he says historically grew faster (11.24% annual average for smaller stocks versus 8% for large stocks between 1980 and 2015).
  • The higher returns come with more volatility: smaller and value-oriented stocks showed price swings magnified by roughly 20 to 50%, and Boo's portfolio lagged the S&P 500 for stretches during the year.
  • The speaker concludes that the extra return does not justify the added risk for most investors, who are better served by index funds' stability and lower drops.

Details Worth Noting

  • Concrete instructions: The video's actionable advice is to invest in a broad index fund that tracks the overall market and then do absolutely nothing, accepting slightly lower returns for more stable growth over decades rather than years. To test a random-stock approach as the speaker did, select stocks by generating random numbers to pick ranks from a top-1,000 list, repeat to gather about 30 candidates, then choose 10 and invest equal amounts in each.
  • The 10 stocks Boo picked for 2021 were Ford, Cerner Corporation, Align, Enel Americas, Republic Services, BlackRock, IHS Markets, Invitation Homes, Tesla, and Netflix, with the speaker noting Enel Americas fell over 30% due to tax reforms and shutdowns.
  • For 2022, Boo's 10 picks were FND, SJM (J.M. Smucker Company), Tyler Technologies, Masco, Photon, First American Financial, Costco, Lamb Weston, Aptar Group, and Williams-Sonoma, with $10,000 invested in each, totaling $100,000.
  • Other animal experiments mentioned include a goldfish that beat the market by an average of 14.5% over 3 years, a cat that beat it by 8%, and a crypto-trading hamster said to have beaten Warren Buffett.

Bottom Line

Random stock picking can outperform the market over time, but the extra volatility makes a simple index fund the more practical choice for most investors seeking stable, long-term growth.