If majority of stocks under-perform T-Bills than how does LEXCX perform very similar to S&P 500 when it has 30 stocks?

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Anon9001
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If majority of stocks under-perform T-Bills than how does LEXCX perform very similar to S&P 500 when it has 30 stocks?

Post by Anon9001 »

Source. Since 1941 the two have tracked each other very well. This fund hasn't changed it's holdings since 1930s.
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JoMoney
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Re: If majority of stocks under-perform T-Bills than how does LEXCX perform very similar to S&P 500 when it has 30 stock

Post by JoMoney »

Size.
You could say something similar about the Dow Jones Industrial Average (30) as well.
The majority of stocks are small cap stocks, and small caps are a lot riskier than large caps, and modest amount of diversity among an assortment of large caps has done just fine.

My understanding of the LEXCX 'Corporate Leaders Trust' was that it was selected by choosing the largest 30 dividend paying stocks of the NYSE at the time of its founding (1935).

https://www.morningstar.com/articles/96 ... ders-trust
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
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galeno
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Re: If majority of stocks under-perform T-Bills than how does LEXCX perform very similar to S&P 500 when it has 30 stock

Post by galeno »

Short answer. Lucky.
KISS & STC.
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Re: If majority of stocks under-perform T-Bills than how does LEXCX perform very similar to S&P 500 when it has 30 stock

Post by Anon9001 »

JoMoney wrote: Sat May 08, 2021 8:39 am Size.
You could say something similar about the Dow Jones Industrial Average (30) as well.
The majority of stocks are small cap stocks, and small caps are a lot riskier than large caps, and modest amount of diversity among an assortment of large caps has done just fine.

My understanding of the LEXCX 'Corporate Leaders Trust' was that it was selected by choosing the largest 30 dividend paying stocks of the NYSE at the time of its founding (1935).

https://www.morningstar.com/articles/96 ... ders-trust
You are correct on this JoMoney what many people who post these links to studies showing majority of stocks under-performing T-Bills don't mention is that for largest companies it is opposite majority in-fact out-perform T-Bills for annual (59%) and decade (70%) horizons and only smallest companies have the worst chance of out-performing T-Bills for annual (45%) and decade(37%) horizons. I got these figures from Page 47 of Hendrik Bessembinder
study on "Do Stocks Outperform Treasury Bills?". Considering LEXCX is investing all into large-caps this explains why it is not under-performing market severely even though it is owning only 30 stocks.
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Re: If majority of stocks under-perform T-Bills than how does LEXCX perform very similar to S&P 500 when it has 30 stock

Post by JoMoney »

^ and something to keep in mind about market cap "deciles" is it takes very few stocks to make up the larger deciles.
The top decile of the U.S. stock market right now would be composed of 2 stocks. There have been times in history when it would be only 1 stock.

Most of the time, half the market by weight is composed of the largest 50 stocks. If you had a diversified assortment among those you would have a very high correlation with the broader stock market.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
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Re: If majority of stocks under-perform T-Bills than how does LEXCX perform very similar to S&P 500 when it has 30 stock

Post by galeno »

Well said.
JoMoney wrote: Sat May 08, 2021 9:15 am ^ and something to keep in mind about market cap "deciles" is it takes very few stocks to make up the larger deciles.
The top decile of the U.S. stock market right now would be composed of 2 stocks. There have been times in history when it would be only 1 stock.

Most of the time, half the market by weight is composed of the largest 50 stocks. If you had a diversified assortment among those you would have a very high correlation with the broader stock market.
KISS & STC.
Leesbro63
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Re: If majority of stocks under-perform T-Bills than how does LEXCX perform very similar to S&P 500 when it has 30 stock

Post by Leesbro63 »

galeno wrote: Sat May 08, 2021 12:35 pm Well said.
JoMoney wrote: Sat May 08, 2021 9:15 am ^ and something to keep in mind about market cap "deciles" is it takes very few stocks to make up the larger deciles.
The top decile of the U.S. stock market right now would be composed of 2 stocks. There have been times in history when it would be only 1 stock.

Most of the time, half the market by weight is composed of the largest 50 stocks. If you had a diversified assortment among those you would have a very high correlation with the broader stock market.
Galeno, I know what "KISS" is. What is "STC"? Stay the course?
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Re: If majority of stocks under-perform T-Bills than how does LEXCX perform very similar to S&P 500 when it has 30 stock

Post by galeno »

Yes. I probably should add "Simplicity is Bliss" to my signiture. But that would complicate it.

Top of the AM to you.

"Galeno, I know what "KISS" is. What is "STC"? Stay the course?"
KISS & STC.
Leesbro63
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Re: If majority of stocks under-perform T-Bills than how does LEXCX perform very similar to S&P 500 when it has 30 stock

Post by Leesbro63 »

galeno wrote: Sun May 09, 2021 8:30 am Yes. I probably should add "Simplicity is Bliss" to my signiture. But that would complicate it.

Top of the AM to you.

"Galeno, I know what "KISS" is. What is "STC"? Stay the course?"
Thank you. I remember you from the Motley Fool boards of about 25 years ago. Are you still in Costa Rica?
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Re: If majority of stocks under-perform T-Bills than how does LEXCX perform very similar to S&P 500 when it has 30 stock

Post by galeno »

Nice to see you. After that 2000-2002 crash I got religion and became Boglehead.

Yes. Born and raised here. If you can comfortly pay your bills CR is hard to beat.

Perfect? No. But when I see a triple rainbow in the sky. Or watch the lava drip off of Arenal volano. I say to myself YEAH.

"Thank you. I remember you from the Motley Fool boards of about 25 years ago. Are you still in Costa Rica?"
KISS & STC.
Leesbro63
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Re: If majority of stocks under-perform T-Bills than how does LEXCX perform very similar to S&P 500 when it has 30 stock

Post by Leesbro63 »

galeno wrote: Sun May 09, 2021 8:51 am Nice to see you. After that 2000-2002 crash I got religion and became Boglehead.

Yes. Born and raised here. If you can comfortly pay your bills CR is hard to beat.

Perfect? No. But when I see a triple rainbow in the sky. Or watch the lava drip off of Arenal volano. I say to myself YEAH.

"Thank you. I remember you from the Motley Fool boards of about 25 years ago. Are you still in Costa Rica?"
I thought you were U.S. citizen early retiring in CR on the cheap.
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