Why the average stock investor is first class honor?
There are many three days stock trading seminars claiming that one can beat the market by consistently earning positive returns, or at least most of the time such that the overall returns over the long run is positive.
Then the high priests of finance, going by the names of financial planners, financial advisers, etc, in the wealth management industry that repeatedly drills you in the head that because it is difficult to beat the market when even professionals in this area are unable to do so consistently, as a result, you should concentrate on your job and profession, then turn over all your investment dollars to professional fund managers and insurance companies.
The people calling themselves “experts” selling three days stock, forex and options trading seminars for a few thousands dollars are not totally wrong when they claim that they can beat the stock market returns. When more than 1000 people sign up and paid for the few thousands dollars three days trading seminars, the sellers of the courses does earn a much greater return than the stock market over the next three days but not necessarily you and most probably not you.
When the high priests of finance, with alternative names like financial planners, financial advisers, banks relationships managers and insurance agents advises you about the need for investing, like stock market returns on average 10% over the long term, they also did not tell lies. Just that the 10% return is not considering load fees, commissions, upfront charges, expense ratios and management fees of mutual funds managed by professionals in this area. Just that they did not tell you that studies after studies from the past decades show that more than 90% of actively managed mutual funds do worse that the market benchmarks that they were supposed to beat that you were better off not paying some clowns 2% or more per year in management fees.
The fact is that most of the stocks trading are done by very highly educated and at the same time well paid professional fund managers, insurance companies, sovereign wealth funds, endowment fund managers, pension fund managers and the likes. Do you think they are financial fools with no college degrees or at least a bachelor degree with first class honors?
While they may be a few average Joe like you and I who occasionally dabble in shares, or people who start to do so after spending a few thousands on stock trading seminars that last only three days, the volume and capital involved is very tiny in comparisons with those highly paid and educated financial elites. The feller selling the three days seminars and earn more than $1 millions if more than 1000 people sign up most probably invest that $1 millions in preference shares of blue chips and physical properties and earn passive income, i.e. sleep and grow rich.
Image Credits: tinyfroglet
Do you think he is going to follow his own stock trading strategies and spend his life watching stock tickers to earn the inflated and most likely false claims on returns? Or already hire 30 hot chicks models to do a naked Macarena dance in a remote island?
As you can see, it is very obvious that the average investor involved in buying and selling stocks in stock market is someone with a first class honors from Harvard and MIT. Stocks is the same with other commodities like apples and oranges, in that when one person is selling, that means need to have another buyer to buy. When almost all the people deciding on buying and selling have around the same knowledge, intelligence and others, the market will be efficient most of the time, it is almost impossible to get a good deal. One does need to think twice about making his or her first million from the stock market.
In my opinion, the stock market is a place to invest your first million but not the place to make your first million, at least for the case of short term trading, though not necessarily buy and hold good companies.
That is the problem inherent in any professional fund managers claiming to beat the market, a so called professional fund manager with first class honors in finance or whatever field from Harvard, Stanford or MIT, is most probably buying a stock that he deems likely to go up from another fund manager with similar educational credentials and experience.
But why the seller with first class honors wants to sell in the first place? Take note that the seller is in every single part as good in this area as your guy managing the mutual fund for you and charging a high management fees.
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It is really absurd, that we hand-over our money to the so-called
“Professional investor”, and they charge a hefty fee for managing the fund.
I, too had the experience of buying mutual funds, and overall the performance
is negative after years of investing it ( on top of it, the charging professional feel is eating away your fund, the moment you buy it). So, I decided to invest myself, so far had been making progress and on recovering over the initial losses.