Originally posted by: HalosPuma
Originally posted by: Skoorb
Did you know that if I take a dart and throw it against a listing of stocks and buy equal stock in the first 10 I hit, and then the average professional investor picks his best 10, chances are I'll win? The moral of this story is it doesn't matter which ones you pick for this project. If you want to see a lot of movement in the stock (up or down) buy some stupid penny stocks. At least that way it will be more fun.
It totally amazes me how people continually try and grow their money by playing the stock market (by playing I mean choosing individual stocks). You can tell them that pros can't, on average, match it (let alone beat it), and yet they still think they can. It's a marvelous case of self-denial.
Actually, that's a myth made popular in the bullrun of the 80's and 90's. "A rising tide lifts all boats" if you will. And you really need to narrow your definition of a "pro." If a "pro" works for someone else and draws his paycheck from them, then he's not a pro - he's just an employee paid to churn out some B.S. so his investment bank can unload their underwritten stock onto you. If a "pro" makes his money selling newsletters, then he's also a phony. The real "pros" are the ones making a living trading as a full-time job. They may have a blog, but they make their money from trades, not being an employee or selling newsletters. I've met several real pros and they are very disciplined and contrarians. They do go with the trend, but get out when it gets too frothy and throw it short when euphoria hits.
Best of luck!
A pro is somebody working at it, as a living, by picking stocks and/or managing a fund, and no it's not a myth--they still can't beat the market. Can you name a many professional stock traders who, for at least five years straight, have beat the market by...oh let's say 4%? Even if you pick one of the minority mutual funds that are beating the market on a semi-consistent basis (funds managed by very capable people), the gains will still be eaten up in commissions and fees and all that fun stuff, so the fact still remains that if you want best return on your money you throw it into an index fund and go wash your car. There may be better investment vehicles, such as real estate, drug trading, etc. but if you're talking about the stock market you cannot name a consistent way to get better returns than an index like the S&P 500.
In any case one thing I'm sure we'll agree on is that if the pros have such troubles, the average guy who's devoting 10 hours/week to it sure as hell is wasting his time. It's a hobby, not a powerful way to make money. The problem is that for every 9 stocks somebody has that haven't done well they've had one that has done well, and so the gambling mentality kicks in and they try, in vain, to make their next 10 stocks the same way.
I'm sure your friends say the get out when it's too frothy and short when euphoria hits, but do they have a history that backs that up? Afterall they're doing everything that everybody else is trying to do. Chances are good that if you ask a chimpanzee to pick his nose or his butt, using a nose as a yes and a butt as a no you could make just as learned a decision on whether to buy or sell a stock as if you asked any number of pro traders.
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