I was scrolling Reddit to get
backtest ideas for my algorithmic
trading platform. Long ago, I had
heard of “the White Girl Index”,
a…
Six Years Ago, this Redditor
proposed “the Neckbeard
Index”. It’s DEMOLISHING the
Market
I 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
In nearly every single
metric, this portfolio
dominates the age-old metric
of “Buy and Hold SPY”. Its
percent change, sharpe ratio,
and sortino ratio are all much
higher than the SPY index
baseline.
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.