Do we have what it takes to beat the market, institutions, and millions who invested in the stock market?
We all invest in the stock market by believing that one day all of our hard work will pay off in the form of enough money to live our lives happily. The answer to this question is not an easy one. At least that is one thing we can all agree on. There are small and big investors in the stock market who buy and sell stocks consistently. Most of all buy securities in believing that we know something others don’t. We may or may not have the necessary tools, information, or insider who will lead us to the high returns, but others like stockbrokers, investment bankers, and big institutions have an advantage. Right? If not, at least most of us think the same thing. On top of that, there are financial advisors who are experts on investments and taking care of a client’s portfolio.
Many big investors have some kind of inside guy or insider information which they cannot legally trade on but possess the necessary financial skills to execute such thing. But, beating the market is much more complicated than this. A few inside information or some financial skill isn’t the guarantee to beat the market.
It is hard to believe that one small regular investor can beat the market when the most pros can’t do it. When you think about it, many professional stock investors and fund managers have a hard time beating the market despite all the resources such as money, manpower, and connections. So, if they can’t predict the future then what chances we have as a small investor?
If anyone throughout the history has done this then it is none other but the CEO of Berkshire Hathaway Warren Buffett. Thus, many investors look to Warren Buffett for investment advice that they can implement in their own portfolios.
Even Warren Buffett opened about the topic a few years back.
According to Warren Buffett, it is very difficult to beat the market, even for the best players. Beating the market is hard to do consistently. Warren Buffett has his own shares of bad years. He thinks that the reason for failing to beat the market is the emotions of average investors and a bad habit to time the market is one of the reasons for their failure.
The biggest issue with the people is their habit of entrusting money to managers, hedge funds, and worse actively managed mutual funds. It is a myth that hedging is a tool used by many rich and successful investors. On the contrary, it is just a costly product for which they pay high fees.
So, what a small regular investor can do to beat the market?
Well, there is not much to tell but there is a lot to discuss. Every investor has a different mindset and different set of skills. So, a single strategy or a magic trick will not work out to beat the market. Thus, it is to you who would’ve needed to know and understand.
For instance, mid-cap and small-cap stocks are riskier to invest as compared to large-cap stocks. But, if do it wisely, you can outperform the market with buying mid-cap and small-cap stocks. So, what you need is an investment strategy which works out for you. Whether you build that strategy through the knowledge and information flow or developed through extensive research.
Hope, this article helped you in a way you expected it to be. Nevertheless, if you have any question or would like to add something here then don’t forget to mention in the comment section below.
Note: All information & data provided in this article is for the educational purpose as well as to give general information on the finance & economy, not to provide any professional advice or service. Views & opinions are not biased against the company and do not affect any official policy or any other agency, an organization within the content.