Take 10 years or the maximum, and it will again turn in favor of Top picks by a clear margin. Your conclusion may still be correct, but you deliberately chose the most unfavorable period.
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There was an article in Arvopaperi, based on which, after Sauli left the Model Portfolio team, the current leadersâ leg muscles might not be sufficient for previous returns in the same way:
Would the solution to this be the same as in the army, i.e., the entire Model Portfolio team every morning in tracksuits for a mandatory run around Inderesâ headquarters until the returns improve? In my opinion, we havenât discussed this approach enough 
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In my opinion, model portfolios are very useful in reminding about the importance of diversification. Even if a professional team is dedicated to pondering the portfolio, it is very possible that a small stock selection contains precisely those bad choices. An index investor, on the other hand, also owns winners. These days, there seems to be a prevailing view that it would be wise to own shares of only a few companies at a time âso that one can follow them.â But following the price wonât make it go upâŠ
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Not much is needed to beat the index. Instead of trying to pick, say, the five best companies, one could pick all the companies in the index and just leave out the five worst. I donât know who would bother to follow such a model portfolio or make investment decisions using it. So, does the goal even need to be beating the index if the other side of the scale offers interesting and entertaining content?
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Model portfolios are perhaps set somewhat unrealistic goals. They should deviate significantly from the index (otherwise, it would be closet indexing and returns would be close to the index) and at the same time consistently beat the market in the medium term (e.g., 3 years).
When deviating strongly from the index, one must understand that returns can move in a different direction than the market for long periods. I visually observed from the curve of Inderesâ model portfolio that the model portfolio clearly started moving in a different direction than the market only in May 2023, although the drop from the peaks was stronger than the marketâs decline.
The exact same phenomenon is present in my own portfolio as well, and yet, long-term returns are clearly better than the index. After all, the model portfolio is still clearly ahead of the index in the longer term.
We know nothing about the future; an investor must decide beforehand whether they believe more in the index or in some active strategy. Time will then tell what happens.
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Interesting point about dropping the 5 worst ones to beat the index. Is it really an easy choice? Inderes once dropped âbadâ Neste. Sometimes a âbadâ one starts to rise, and a âgoodâ one gets stuck.
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They probably wouldnât have dropped them if they had been allowed to choose all but the five worst(?)
Even the lottery is easier the more numbers you can pick on the ticket 
There have been (and probably still are) such index funds â the idea is indeed to drop the âworstâ companies and thereby generate excess returns. For some reason, these funds generally havenât been very long-lived, often being changed or merged into regular index funds. This strategy, either, has not been a shortcut to success.
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One can also practice active indexing. In this case, the weightings of index funds and cash are varied according to market conditions. Even then, one could beat the index because cash is king during downturns. However, if the timing is right, the tax authorities will take their share, so⊠+/- 0 result easily there too, Iâd guess.
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It turns out the model portfolio sold too early. The sale of Nokian Tyres cannot yet be definitively called a mistake, but at least the sale didnât hit the mark. For valuation in an earnings trough, P/B is a better metric than P/E, and it is around 1.2. In my opinion, this is quite okay. Nokian Tyres can no longer be considered dirt cheap, but not expensive either in my view. Fairly neutrally valued if and when earnings start heading northeast. On top of that, with a little excitement, âŹ20 could easily be broken before the turn of the decade, but first they have to deliver.
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Why wasnât the ten-bagger Bittium part of the Inderes Model Portfolio? It would have fit in many ways.
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Has been on a REDUCE recommendation until yesterday!! Characters,characters,characters,characters,characters
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Nokian Tyres has risen by about 50% in just four months since the stock was sold from the model portfolio.
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Yeah, Iâve only followed the model portfolio rarely and out of the corner of my eye, and it doesnât interest me, and I donât want to bash the model portfolio, but itâs an absolutely senseless setup with its rules and portfolio managers, without a common threadâat least as bad as 99% of Finnish equity funds, if not worse.
I wonder: why would any beginner or experienced investor spend any of their precious time or energy on the model portfolioâbetter info can be found for that time just by browsing company-specific threads.
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Iâm responding to this as someone who has more or less invested alongside the Model Portfolio partly since 2020. The reason I spend energy on this is that I believe the âpotentialâ for returns that genuinely beat the market clearly exists. I donât see how, for example, @Juha_Kinnunenâs expertise in the stock market would have suddenly vanished into thin air; rather, the winning streak of smaller companies (which the Model Portfolio, at least in my view, seems to focus on) has been brutally cut short in recent years (see the FNFIEURGI index, for example). Furthermore, most of the failures can be explained quite algorithmically by the fact that usually a single thesis regarding a buy/sell has gone south (leading to the case failing and resulting in underperformance), which inevitably happens to any investor.
I would see that a much more likely explanation for the Model Portfolioâs underperformance is simply a prolonged bad streak, which comes to all investors sooner or later. This is my assessment based on current information. Historically, however, the Model Portfolio has beaten its benchmark left and right, and I donât see the possibility of this continuing having magically disappeared amidst the misery of Hesuliâs (Helsinkiâs) small-cap companies.
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As I mentioned, I only brought up my surprise â and Iâm not judging the portfolioâs creator nor underestimating those who utilize the portfolio. However, it is a fact that there has been underperformance not just for one year but for several, and the successful early stages are history. Ultimately, each of us is only as good an investor as â if not the latest investment, then at least the latest year! Letâs look at your arguments again in a year, @Johannes_Sippola â âwhere would the expertise in the stock market have suddenly disappearedâŠâ Hopefully Iâm wrong and it has returned, but let me also be allowed some doubt in that regard.
ps. I really donât understand your reasoning in the sentence âalgorithmically, because most often one thesis âŠâ What does âalgorithmicallyâ have to do with this and goodness gracious, the portfolio is a whole, whether one thesis has taken away or brought returns, and the final result is always the whole. Good luck to everyone anyway with the work and building confidence; letâs of course always rather look forward.
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The timing was poor, but this is an exaggeration.
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It also matters what replaced it. I assume there was some better investment there? I havenât been followingâŠ
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Yeah, I didnât look that closely, you always have to exaggerate a bit 
I think it was replaced by Vaisala, which hasnât really moved anywhere. Vaisala is of course a very high-quality company and surely good in the long game.
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There have been some quite good picks there on a short-term basis. The best being Canatu with an 18% rise, but they arenât so brilliant that they would be enough to compensate for the poorly timed sale of Nokian Tyres.
The model portfolio could use some technical analysis in its execution. Right now, buying and selling are done too much against the momentum.
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