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Showing posts from January, 2008

You are NOT smarter than the market

You are not smarter than the market. Accepting this basic fact is the first step toward successful investing. That is counterintuitive to some people. There are lots of people out there who want to "beat the market". They hire financial advisers who claim that they will help them accomplish this allusive goal. There are also people out there who want to win the lottery, they buy lottery tickets. In both cases, you hear a lot about the "winners". What you don't hear is that there are a lot more losers and the odds are you will be one of them.

Now, financial advisers will argue that what they do is not really gambling because they can control the outcome. They claim that by being "smarter" they give you a leg up on the typical investor. That isn't really true because the market price of stocks in not set by the "typical investor". Prices are set by the collective wisdom of market professionals, many of whom manage billions of dollars each. …