You’ve all heard it before. You can’t beat the market [insert reason]. I call these people naysayers!! =P
Here’s some of the common reasons I’ve heard
- Index funds and ETFs are much safer and usually do better
- The fees and stuff will kill all your winnings
- The market is perfect and thus it is impossible to look for any mispriced stocks
- it takes too much time
- it is too risky
You know what? Of all I’ve ever read and experienced it seems that the above are all true for the most part! With a few exceptions ( you can dodge some of the fees) they are all perfectly true. So why do I continue to put my money in the stock market and try to “beat” the market then? I’ll try to tell you why I do it with as little words as possible!
- Regardless of how “perfect” the market is there is still opportunity
- I want to learn about how it all works and being in high risk, involved positions forces me to take the more difficult path and learn it rather than sitting back and watching it happen. I believe this knowledge is invaluable in reflecting many aspects of the business world as well as our culture.
- I’m young (and dangerous =P) and I can tolerate risk.
The only one of the those that really needs explanation is #1 so here goes! One example, Psychology. Even though all information flows perfectly and no one can get an “edge” on the other by getting any information any earlier, that doesn’t change basic human organization behavior problems like mob mentality. Case and point: Microsoft rumored to buy Yahoo…. Instantly EVERYONE wants in on Yahoo and the stock/value of the company rises 20% within 2 hours of opening, then drops down back to exact same place as before within 4 days. Information flow is perfect, but mob mentality still works. I can’t imagine how many people lost money there. Basically, just because information flows at light speed or whatever these days, that doesn’t mean that its not humans making decisions based on their perceptions of the information and on other’s perceptions. There’s plenty of room for error, which is great for guys like me 
.
Conclusion : Trying to beat the market is totally possible. Maybe very difficult to maintain in a long term way but totally possible. There is just too much fluctuation out there to not be getting a piece of. It’s not for everyone but for young people, it’s definitely a good way to make some quick money [maybe] but definitely a great way to learn a lot about the business world.
As always, comments appreciated!
Double Up by R. Kelly
