The Stock Market Is FREE MONEY | DO THIS NOW

What's up, Grandma's guys? Here, so let's face it, the stock market is easy money. In fact, in just the last 12 months, both the S&P 500, the Dow Jones, and the NASDAQ are all up over 30 percent. Nearly every single stock you can imagine is up substantially from a year ago, meaning it's been nearly impossible to lose money.

Because of that, there's no shortage of experts, hedge funds, and Wall Street conglomerates congratulating themselves on their wild returns, making money hand over fist while you think to yourself, "Hmm, I want some of those tendies too!" Well, not a problem. To show you just how easy it is to make money in the stock market right now, I invested a hundred thousand dollars into 10 different stocks that were picked at random by a monkey. And best of all, those stocks are even outperforming the S&P 500 without any time, research, or work whatsoever!

So, we gotta talk about exactly what's going on: how a monkey is beating the stock market, precisely what I invested in, the strategy behind this, and then finally how you could use these exact same techniques to make as much money as possible. But first, monkey business—decide absolutely helps me out a ton. If you go bananas on that like button by making it turn blue, I'll give it—seriously, monkey puns aside—it takes you just a quick second, it's totally free, and it helps up my channel tremendously.

As a thank you for doing that, here's a picture of me holding a picture of me holding a picture of me holding a picture of me holding the like button! Also, a big thank you to Policy Genius for sponsoring this video, but more on that later.

Alright, so all of this started in December of 2020 when I was doing some good old-fashioned stock market research and came across a quote by The Economist, Burton Malkiel, who said that a blindfolded monkey throwing darts at a newspaper's financial pages could select a portfolio that would do just as well as one carefully selected by experts. And that got me thinking: I should try that. After all, studies have shown that not even the most intelligent investors can consistently beat the stock market.

So maybe, if we took the opposite approach and took stock market instruction from a monkey with no emotional tie or ego to prove, that could be enough to win over the market. But there was a problem. First, I didn't have a monkey; second, even if I did have a monkey, it would be dangerous to give him access to a dart while blindfolded; and third, I have no idea if this would actually work. Thankfully, though, YouTube came to the rescue, and within a few hours, I was introduced to the fun-loving celebrity Monkey Boo, whose owner volunteered to help me out on my quest to beat the market.

Now, obviously, we were not gonna have him throw darts, but he was able to pick stocks at random that I could invest in. Here's how that was done: I found a website that lists the top 1,000 publicly traded companies in the U.S., then I used a random number generator to pick a number one through a thousand that would correspond with the ranking of each of those stocks on the list. I repeated that process 30 times so I could randomly select a large enough sample size for Boo to pick from, and then with each of those 30 stocks written down on a piece of paper, Boo proceeded to hand-select 10 of them where I could invest ten thousand dollars each.

Now, to my surprise, those 10 randomly picked stocks by a monkey that I invested a hundred thousand dollars into are doing better than the entire index they were picked from—up 21 percent in the last nine months. If you're curious exactly which stocks they bought and how well they did, well here you go:

1. Ford - They're one of the largest auto manufacturers in the world. They sold 4.2 million cars in 2020, and their new Mustang Mach-E is the number two best-selling electric SUV in the U.S.
2. Cerner Corporation - They provide health information technology devices and hardware with more than 28,000 employees around the world.
3. Align - They manufacture 3D digital scanners and the Invisalign braces used by dentists.
4. Enel Americas - Is a conglomerate of energy companies located in South America.
5. Republic Services - Is one of the largest waste management companies in the U.S. They've also begun investing in solar products and natural gas, which is not an opportunity to be wasted—get it?
6. BlackRock - They're an investment corporation with nine trillion dollars under management and a history of solid growth.
7. IHS Markit - Provides data and trade processing, foreign exchange, and loans.
8. Invitation Homes - Is one of the largest owners of single-family properties in the U.S., owning approximately eighty thousand homes.
9. Tesla - They manufacture the most popular and data-driven electric vehicles in existence, recently passing more than one billion dollars in net income for the first time in its second quarter.
10. Netflix - One of the top streaming platforms in existence with over 200 million paid subscribers worldwide, even though it takes you an hour just to decide what you want to watch.

This all gives me a total return of 21.62% since December 21, 2020, which is higher than the 18.8% total gain of the S&P 500. What’s really weird about this is that these returns are actually somewhat normal for a monkey. If you're confused about that, let me explain.

But before we go into that, since summer's almost ending, we gotta talk about making sure you're saving as much money as possible on life insurance. Thankfully, our video sponsored today by Policy Genius is here to help.

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Alright, so now here’s the information you've been waiting for. When Burton Malkiel originally made the statement that a blindfolded monkey throwing darts at a newspaper's financial page could select a portfolio that would do just as well as one carefully selected by experts, his words were put to the ultimate test in 1988. The Wall Street Journal simulated this experiment by pretending to be a monkey throwing darts at a random list of stocks and then comparing those results with the professionals over the following six-month period to see who ended up making the most amount of money.

This experiment was repeated over a hundred times throughout 14 years, and surprisingly, forty percent of the time, the monkeys earned a higher return than the experts did. To make matters even worse for the experts, they barely even managed to outperform the Dow Jones Industrial Average, even though they had every piece of analysis and research available to them at their disposal. Another group of researchers also conducted this experiment from 1964 to 2010, and they found that their monkey portfolio consistently beat the stock market by an average of 1.7% a year, 96% of the time.

And it doesn't even stop there! Goldfish's stock picks were simulated over a thousand times and beat the market an average of 14.5% over three years. There’s also a cat who beat the market by eight percent, a monkey named Adam who beat Jim Cramer, and a chimpanzee who beat 94% of Russian bankers. This begins to make you realize this can’t just be a random coincidence that all of these animal portfolios tend to do so exceptionally well. Maybe we've just discovered the secret to becoming one of the most famous investors of all time.

Believe it or not, there’s actually a formulated reason why the monkey and animal portfolios get such a high return, and it has nothing to do with luck, chance, or a highly intellectual genius stock-picking monkey who could predict future stock prices—even though that would be really cool. Instead, it has to do with the strategy being used to pick stocks that tends to do well consistently year over year.

This is what it is: Research conducted in 2013 found that by randomly selecting 30 stocks out of the top thousand companies and then buying them all in equal proportions, you’re increasing the likelihood that such a portfolio would contain smaller stocks, which have higher potential for more growth. Because monkeys are not emotional and didn’t panic-sell because CNBC ran an article with a headline that was kind of spooky, that led to an outperformance of the entire market year after year.

In other words, smaller companies have a stronger likelihood of seeing higher than average growth, and when you buy those companies in equal proportions to the stronger, more established growth companies, you increase your chances of beating the overall market. Index funds, on the other hand, represent companies in proportion to their size, and therefore the top 10% of stocks contribute to 50% of the index—slowing down your overall return by giving you smaller, more consistent growth.

As proof of this, between 1980 and 2015, smaller stocks returned 11.24% annual growth on average, while large stocks returned 8%. So that just means when 30 stocks are picked at random, investing an equal amount in each of them, you're more likely to include smaller stocks, which would boost your overall return when compared to the index. Voila! You've beat the market.

Now, even though this sounds like the ideal way to invest, you’re probably thinking to yourself, "Well, Graham, if it’s that easy, why doesn’t everyone just do this?" Well, I hate to rain on the parade, but there is also a reason for that too. The reason is simple: risk. Even though smaller companies outperformed the market by 1.7% 96% of the time, they experience significant volatility, meaning just as much as they went up, they also went down.

For example, if we compare the top 1,000 growth companies with the top 2,000 value companies, we could see that nearly every price movement in the value category is magnified by at least 20% to 50%. So every market peak is higher and every market drop is lower. Risk is something that every single investor needs to consider when they think about how much money they want to potentially make or lose.

After all, if you didn’t care about risk and you just wanted a small chance at making as much money as fast as possible, go and throw everything you have into 30-day AMD call options and see what happens. But almost no one is going to do that because there's too much risk that you could potentially lose everything. But you also don't want to play it too safe either and throw everything into a savings account, because even though there's no risk, there’s also not enough upside.

The reality is, with investing, you have to balance the amount of money you make with the level of risk you're willing to take. For most investors, taking the short-term volatility of investing in 30 completely random stocks to get a 1.7% average higher return doesn’t generally beat the safety of investing in 500 different companies throughout the entire index and earning a little bit less.

My monkey portfolio is a perfect example of this. Even though I am slightly beating the overall market, that was almost entirely because of these top three stocks, which could have very easily gone the other way and worsened my return. But thankfully, more people liked the Mustang Mach-E than expected, and that's good for me.

I was also just as perplexed about the performance of these stocks because, I'll be honest, it's not what I expected initially. I had the highest expectations for both Netflix and Tesla, which, as you could see, were some of the worst-performing stocks of the entire list. On the other hand, the stocks I was not extremely optimistic about—including Invitation Homes, Ford, and Republic Waste Management—were some of the highest returns in the entire group, which I was not expecting.

It really goes to show you that sometimes, even though we think we have the best instincts, we really don’t. Objectivity is nearly impossible to utilize for something like this because these were stocks that I never would have invested in on my own if it were not for a stock-picking monkey. That’s why, as interesting as this experiment is and as fun as it is to research and watch, when you account for both stability and risk, the best investment still tends to be throwing it all in a broad index fund tracking the entire market and then doing absolutely nothing.

Even though technically, 96% of the time, you’re going to see a slightly lower return, you end up paying that extra little bit for the assurance that your returns will be more stable. The drops will be smaller, and you’ll see more consistent growth over decades—not necessarily years. This strategy has even outperformed the best hedge funds and actively managed investments in the entire world by a rate of nearly double, showing you that over the long run, no one has a clue what's going to happen, including myself.

Even though everything is really easy to point to in hindsight, in the moment, there are so many different variables that you have to take into consideration that may or may not happen, which makes it really impossible to predict any meaningful outcome. On top of that, let's be real— the entire market is up from a year ago, and you could have invested in anything and looked like a genius after the fact.

It's important not to let this get to your head or for you to think you're a stock-picking genius because everything is up. As the billionaire Chris Sacca said to everyone who got in the stock trading this year, I have a little hard truth for you: you’re not actually that good at it; you just caught a wild bull market—which, in a way, is true.

Now, as for the monkey portfolio, I will continue to watch how it performs over the next year. As a thank you for making it to the end of the video, I got a challenge for you: if we could get this video to a hundred thousand likes, I will strongly consider investing a million dollars into recreating this experiment again by going back to the Monkey Boo, having him pick 30 random stocks, and investing thirty-three thousand dollars into each of them.

Then, we could see exactly what happens to it over the next year when we compare it to the overall stock market. If you think I'm joking with this, hit the like button. If this actually gets to a hundred thousand likes, then I know there's enough demand out there for me to go ahead and do this.

So until then, the choice is yours: either invest your money in a broad index fund and get a safe, stable return, or smash the like button and watch me invest a million dollars into a stock-picking monkey. Enjoy! So, with that said, you guys, thank you so much for watching. I really appreciate it! As always, make sure to smash the subscribe button and the notification bell. Also, feel free to add me on Instagram—I post there pretty much daily, so if you want to be a part of it, feel free to add me there as well.

And on my second channel, The Graham Stephan Show, I post there every single day. I'm not posting cures, so if you want to see a brand new video from me every single day, make sure to add yourself to that. Thank you so much for watching!