Six Years Ago, this Redditor proposed “the Neckbeard Index”. It’s DEMOLISHING the Market
Austin Starks · Originally published
Austin Starks ∙ 4 min read ∙ View on MediumI was scrolling Reddit to get backtest ideas for my algorithmic trading platform. Long ago, I had heard of “the White Girl Index”, a collection of targeting investments that adult white women would buy. This included Target, Starbucks, and Lululemon.
The “White Girl Index”
Portfolio
While scrolling through the comments, a random Redditor proposed something that I found hilarious. The “Neckbeard Index”. You can guess why it might be called that.
The “Neckbeard Index”
The Neckbeard Index contains stocks such as:
- NVIDIA and AMD for buying graphics cards for their gaming PCs
- PepsiCo and Domino’s Pizza because Neckbeards are stereotypically overweight
- Netflix because they tend to watch animes
- Amazon because they’re too lazy to buy their own groceries
- Tesla because neckbeards love Elon Musk and virtue signaling with electric cars
- Obviously Bitcoin
Keep in mind, this Redditor proposed this index 6 years ago. He is not a time-traveller, and had no knowledge of what was to happen 6 years later.
Imagine my surprise when I saw his Neckbeard Index was demolishing the market.
The “Neckbeard Index”
portfolio
Apples to Apples: Evaluating the Neckbeard Index
This May 2024 retrospective compares the proposed basket with buy-and-hold SPY over roughly five years. The listed assets are NVIDIA, AMD, PepsiCo, Domino’s Pizza, Netflix, Amazon, Tesla and Bitcoin. The Reddit proposal is described as six years earlier; its exact selection date is not printed in the article.
The screenshots show the reported return and risk comparison, while the article does not print the allocations, rebalance schedule, exact test endpoints or costs. Those settings must be inspected in the original linked portfolio before reproducing or treating this as a controlled comparison.
The reported gain came with materially larger losses along the way: maximum drawdown was nearly twice SPY’s and average drawdown about three times higher. Inspect both the gain and those declines when interpreting this historical basket.
However, this portfolio is also dramatically more volatile. The maximum drawdown for the Neckbeard Index was nearly twice that of the SPY portfolio, and the average drawdown was 3x higher. Its clear that the euphoric gains would be met with depressing losses.
Biggest Winners and Biggest Losers
Some of the bigger winners of this portfolio included NVIDIA, Tesla, and Bitcoin. These stocks gained 7, 10, 20x from their initial value 5 years ago.
Even the “losers” in this portfolio, like Netflix, and PepsiCo, did fairly well, increasing from 70–90%.
How this Redditor had the foresight to predict all of these amazing companies bewilders me.
Caution Ahead: the Past Doesn’t Equal the Future
While the Neckbeard Index portfolio saw incredible returns over the past 5 years, it’s critical to remember that past performance does not guarantee future results. Many of the stocks in this index have seen euphoric runups and trade at extremely high valuations compared to the broader market. High-flying growth stocks like Tesla, NVIDIA, and Bitcoin are prone to dramatic volatility and sharp corrections. With market sentiment shifting and interest rates on the rise, the macroeconomic backdrop today looks very different than it did 5 years ago. Investors chasing heat and piling into the Neckbeard Index now expecting a repeat of the past 5 years’ performance could be setting themselves up for disappointment.
Conclusion
The hypothetical “Neckbeard Index”, proposed jokingly by a prescient Redditor 6 years ago, would have absolutely crushed the market over the past 5 years, generating returns that left the S&P 500 in the dust. While a humorous thought experiment, the Neckbeard Index highlights how identifying certain market themes and trends early, like the rise of gaming, EVs, streaming, e-commerce, and crypto, can produce oversized returns.
Using the powerful backtesting tools at NexusTrade.io, I was able to quickly pull historical data and evaluate how the Neckbeard Index would have performed over various timeframes and market conditions. NexusTrade.io makes it simple for investors to test out investment theses and see how different portfolio constructions would have fared.
However, investors should be wary of performance chasing and understand that nosebleed valuations and changing market conditions mean the Neckbeard Index’s incredible run may not persist into the future. As always, maintaining a balanced, diversified portfolio suited to one’s risk tolerance and investment time horizon is the wise move. But the Neckbeard Index definitely makes for an entertaining story! Thanks to tools like NexusTrade.io, everyday investors can put fanciful notions like the Neckbeard Index to the test and uncover real insights.
Respond on Medium View story
No comments yet.