There are lot of different opinions on what the best investment strategy is. Roughly as many as there are investors, probably. But there’s now a fascinating line of research that suggests that the best strategy for investment isn’t any kind of plan at all. Rather, the authors of a new study suggest, the best way to invest is to invest randomly.
This doesn’t come from nowhere. The authors of the study have been probing the strength of random decisions over planned ones in dealing with a variety of leadership situations. They’re inspired, they write in the paper, by the fact that “[i]n physics, both at the classical and quantum level, many real systems work fine and more efficiently due to the useful role of a random weak noise.”
The basic idea behind their hypothesis is the fact that knowledge of markets – no matter how much of an expert you are – is going to be pretty limited. That, they think, will cause people to start to see patterns that aren’t there. Which leads to misleading strategies and poor investment decisions. So they wanted know if ”a trader assumes the lack of complete information through all the market… would an ex-ante random trading strategy perform, on average, as good as well-known trading strategies?”