What is the Solin Random Stock Index?

The Solin Random Stock Index (SRSI) is a new benchmark against which investors can track the returns of their stocks and mutual funds. It can also be used to evaluate the performance of your "market beating" broker or advisor.

Here's how I put it together. I took the spelling of my last name and punched each letter into the Daily Finance quote engine (dailyfinance.com). Then I selected the first two stocks that appeared for each letter. My only criteria was that the stocks were listed on a U.S. stock exchange. Here's the list:

1. Sprint Nextel (S)
2. Sirius XM Radio Inc (SIRI)
3. Realty Income Corp (O)
4. Oracle Corp (ORCL)
5. Loews Corp (L)
6. Las Vegas Sands Corp. (LVS)
7. Intel Corp (INTC)
8. International Business Machines (IBM)
9. Netsuite Inc. (N)
10. Nvidia Corp. (NVDA)

Why should the SRSI be significant to you?  Because 90% of individual investors rely on the advice of brokers and advisers who tell them they can put together a portfolio of stocks or actively managed mutual funds that will "beat the markets."  There is precious little data to support the existence of this skill, yet investors chase returns every day, to the detriment of their returns.  While the SRSI is an imperfect benchmark, it will give you a measure of how a random portfolio stacks up against the "expertise" of your brokers and fund managers.

I was inspired to form the SRSI by Lusha, a chimpanzee in Russia. According to an article in the U.K. Daily Mail, Lusha's stock picks outperformed 94% of the country's investment funds. Her portfolio increased in value by 300% leading to this insightful observation by the head of monetary policy at the Institute for the Economy in Transition in Moscow: "It shows that financial knowledge does not play a great role in giving forecasts to how the market will change."

Precisely my point.

I'll keep you posted on the performance of the SRSI in my blogs on Daily Finance and here. I will measure the performance starting January 1, 2010. I am pretty confident the SRSI will beat the returns of most stock picking experts. Outperforming Lusha may be another story.

I am aiming for a 5 banana rating!