‘Sophisticated Investor or Lucky Investor?

Each week I write about the evil Wall Street bullies. I write about the efficient markets. That all the available information is already factored into the price of the security. Of course, the equity markets are not ALWAYS perfectly efficient. There are periods where the equity is not perfectly reflective of all information. But the equity markets are far too efficient to consistently predict the next ‘hot’ stock or asset class. It is also far too efficient to take advantage of any ‘bad’ stocks or asset class.

The question becomes why does the investing public continue to seek out the next ‘hot’ stock or ‘hot’ asset class? What are they looking for? Do they really believe there is a short cut to financial success? The Wall Street bullies know that the investing public is watching their financial pornography and the inevitable success stories. Of course, it is possible to hit the right stock or asset class at the right time and make it ‘rich’.

Unfortunately this success is rarely repeatable. Someone always comes back from Las Vegas with a winning story. But these casinos were not built by having their customers consistently winning. The casinos know that someone has to win in order to build the ‘hype’ and keep gamblers coming.

The Wall Street bullies need to build the same ‘hype’ to keep investors money moving. These same bullies will also feed the fear during market downturns.

Every day I talk with ‘sophisticated’ investors who tell me they are doing ‘pretty’ good. I hesitate to ask them what ‘pretty’ good means. Do they compare their results with the appropriate benchmark like the S&P 500, for large stocks or the Russell 2000 for small stocks?  I kind of doubt that they do.

These ‘sophisticated’ investors believe that through extensive research and their own gut instincts they can beat the market. Unfortunately, these investors rarely compare their results to the benchmarks. Their egos do not allow them to admit that they were wrong.

Usually they will point to a few successes and assume if they repeat the same process they will repeat the same success. What they don’t realize is that their success was a matter of luck and not skill. These ‘sophisticated’ investors are not in fact investing but rather speculating with their investment money.

This is exactly what the Wall Street bullies want them to believe. If the bullies can keep these ‘sophisticated’ investors trading they will generate huge amounts of fees for the bullies. Regardless of the outcome.

Stop empowering the Wall Street bullies and fire your broker/agent and hire an investor coach/fiduciary adviser.

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