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Picking stocks at random may give you outsized returns

A fortune spinner wheel on a casino game that resembles the big spinner from the television game show, 'The Price is Right.' The wheel has landed on the '10' value, which has blue numbers against a green background. Other numbers are visible on the wheel, including one thousand, eighty, and thirty. Those numbers are white against a black background.

Photo by Krissia Cruz on Unsplash.

Stock picking and portfolio construction is a mix of luck and skill — or it is mostly luck? A recent Wall Street Journal column, The Random Path to Stock Market Riches, tried to answer that question.

In the column, WSJ columnists threw 12 darts at stock-market listings a year ago, and managed to outperform some of the best fund managers in the country. Not only did they outperform the experts by 48 percentage points, but they achieved an 80% return over the year.

Their portfolio was risky. Semantix, for example, ended up being delisted after losing 97% of its market value. Shares currently trade for a whopping $0.05. Major U.S. exchanges require a minimum share price between $1 and $5 to remain listed. One single stock, Root, Inc. was responsible for most of their gains.

Finding those super growth stocks is really difficult. I've managed to luck out a couple of times, but never with a large enough position that would allow me to retire 😄. As often as not, my individual stock picks have resulted in losses. I'd have done just as well to throw darts at stock market listings taped to my wall.

Now I don't have darts, a cork board, or a listing of stocks just hanging around my home office. But I do have a computer, just enough programming knowledge to be dangerous, and a JSON file cribbed from Vanguard’s Total Stock Market Index Fund (VTSAX). Add an afternoon without any obligations, and you get my latest fun little side project: Random Stock Picker dot page. (I chose the .page domain because it was the cheapest option.)

I hope you have fun with the tool. Track its stock picks over the course of a year. If you're the gambling type and have a high risk tolerance, feel free to put some money on the line. Just don't take this for anything other than an internet joke by a bored programmer type.

Most of us would almost certainly get better results by investing in an index fund instead. Choose one that owns roughly equal dollar amounts of every share in its portfolio. Funds that are weighted according to company's market capitalization don't give you the same level of exposure to companies with high growth potential.