November 29, 2019

Why you get higher returns with Obermatt Ranks



In sports, measuring performance is relatively simple, because you measure what you see. But this is not the case when investing, because what you see is in no way proof. No investor can prove that he is better than the market because there is simply not enough data for such proof. Every economist will confirm that for proof of return it takes decades of data series that have emerged in all imaginable economic situations. This is simply not possible. Anyone who provides proof of performance with ten to twenty investment years under their belt is showing data that is hardly more meaningful than lottery numbers. This does not mean that there are no investors who are better than the market. These exist with certainty. It only means that this cannot be proven with the data. Anyone who does that is doing nothing more than window-dressing.

When we at Obermatt say that our ranks help you to be better than the market, we do not claim this based on our own figures but based on extensive studies by third parties. These studies are known in the professional world as "Factor Investing" or "Smart Beta". You can easily find these studies yourself if you search for them.

Experts know that there are factors, i.e. characteristics of shares that can be measured with financial ratios, that lead to a better return in the long run. These factors are used in the Obermatt method. Obermatt Ranks are nothing more than "investment factors" that people understand and can easily use.

Of course, these studies are only a picture of the past and we don't know if they will apply in the future. So even this proof of the probable return above the market with Obermatt ranks should be taken with caution. Personally, I am confident that the factors used in the Obermatt method will continue to work in the future because they are based on valuation errors in the market. Such mistakes will certainly continue to happen in the future.

Why does an investment factor generate an excess return? This is because extreme conditions tend to return to normal. It's like a pendulum. Even if the pendulum deflects strongly to one side, it returns to the middle again. This also applies to stocks. If stocks are performing very high at the moment, they will certainly perform lower again. Stocks that are just about to plummet are very likely to recover again and thus have a great opportunity for an above-average return.

For you as an investor, this means that when you use the Obermatt method, you benefit from stocks that are currently doing a nosedive. However, this does not mean that you will not suffer any losses. If you ski throughout the winter, you will fall more often than if you only go out on the slopes at Christmas. Nevertheless, the Christmas skier will be worse at skiing than someone who skis a lot more often. The more often you invest, the more often you will see losses. That's life and as an investor you can't escape it. On average, however, you will do better in the long run, because you will be supported by the well-documented investment factors known in financial science.

If you would like to find out more, we published a lot of information on our website. Search for "Performance" in the menu or the search box and you will receive all our analyses on the performance of the Obermatt Ranks. You can download these studies and discuss them with financial experts you trust. On request, we can also provide all our historical data so that you can perform all the analyses yourself. We have great confidence in our Obermatt method. You should too, because the method is what matters.



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