Investing in The Forbes Billionaires Index Could Be Profitable

Every year, Forbes publishes how global tycoons make their money, and how they plan to spend it. Joel Shulman, money manager and Professor of Entrepreneurship at Babson College, hypothesized that money could be made by investing according to the billionaires that Forbes tracks annually. He thought this would be so because successful entrepreneurs tend to continue that success because they have a solid mix of instinct and skill to keep them consistently thriving.

Shulman listed all the public U.S.-based companies that the Forbes billionaires controlled and then tracked their performances from 1986 to 2011. He found that if you had started investing in these companies in 1986, you would have almost $5,000 by 2011. These gains substantially exceed gains from other benchmarks such as the Russell 2000, Russell 3000, and the S&P 500. Furthermore, the strategy requires little beyond updating your fund each year according to Forbes list.

It is still important to diversify with this approach because the “billionaires index” is volatile. So don’t invest all of your money into this strategy. Shulman thinks that this investment could be a good way for average people to take advantage of the rich and their success instead of grumbling about not being a part of the class.

See Christopher Matthews, Forbes Billionaires List: If You Can’t Beat the .0001%, Join ‘Em, Time Business, Mar. 7, 2012.

Special thanks to Peter Parlapiano (MBA/M.S. Personal financial Planning, Texas Tech University) for bringing this article to my attention.