Active Stock Picking vs. Indexing Challenge

[rockrock]

Since I am so severely outnumbered in the "Another Book Question" thread I have decided to put my money where my mouth is.

This challenge is open anyone (and multiple times - i.e. not just once).

Choose from 1 to 500 stocks in any asset class (doesn't matter - emerging markets, reits, small cap, large cap, mid cap, microcap) other than international small cap (since there is no index).

I will pick an index mutual fund or etf that corresponds to the asset class of those equities (i.e. if you want to pick small caps i would pick IJR, midcaps MDY, micro I would choose IWC, etc)

I will bet I am ahead after any time frame longer than 6 months.

Since I am clearly the underdog here, you must lay me 6 to 5.

Would Marketocracy be good for this? i.e. - do they track trading costs? Are trades executed in real time? Sure they don't use delayed quotes.

The only 2 requirement is that any securities traded must be in the same asset class (we can work out market cap sizes based on S&P/Barra/MSCI indexes) and you must trade long (not shorts, etc).

You will also have to factor in taxes (short term cap gains, dividend taxes, etc) from your winning trades and deduct your losing trades. We can assume 15% on dividends and LT Cap gains, 25% on short term cap gains.

We cannot do this with securities from more than one asset class because my argument is that an index fund will outperfom any security in its index (whether picked randomly or from your laser-like elite stock picking skillz).

My actual argument is that indexing beats active management, but since I believe equity performance is a function of asset class and not some super-duper analysis by you genius stock pickers, this is the only way to decide who is right (but I am open to other ideas).

We can work out amounts and who will hold the money privately.

It's possible we could do sectors - i.e. you want to use knowledged gleamed from Graham and what-his-face to analyze large cap tech firms, I will choose XLK. Think those nobel prize winning economists are confused and you can use your expert knowledge of the health care industry to pummel me? Let's see if you can beat XLV.

PM me if interested or whatever - I am serious about this and since everyone thinks I'm wrong I may need to hire a secretary to keep up with the stampede of stock pickers looking to pluck this low hanging fruit.