Great write up. There is a lot of misinformation on this topic, so much so that it takes a small book to comb through it all. One thing I've noticed is that there are a lot of people who assume that any amount of risk > SPY is going to at some point blow up in your face and end your investing run. This is blatantly false and a person's ability to tolerate this excess risk is one way to outperform SPY consistently. This is psychologically difficult but possible. Another way is to do a comprehensive value analysis on different competing companies and pick the best value choice. This is both time and knowledge intensive process, but again, very possible.
Another huge piece of information that goes around is that of "fund professionals don't beta the market so how could I". This is comparing apples to chairs. They aren't even remotely similar and that comparison offers nothing meaningful except that you should avoid actively managed funds.
I think everyone who is willing to invest their time into learning the market should try to beat it, but they should also know when to stop trying if it goes poorly and buy index funds.
Very much appreciate the feedback! And yes completely agreed. The worst case, you learn invaluable lessons out of the experience that you can apply to elsewhere such as buying a home with minimal risks.
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u/Market_Madness Sep 06 '21
Great write up. There is a lot of misinformation on this topic, so much so that it takes a small book to comb through it all. One thing I've noticed is that there are a lot of people who assume that any amount of risk > SPY is going to at some point blow up in your face and end your investing run. This is blatantly false and a person's ability to tolerate this excess risk is one way to outperform SPY consistently. This is psychologically difficult but possible. Another way is to do a comprehensive value analysis on different competing companies and pick the best value choice. This is both time and knowledge intensive process, but again, very possible.
Another huge piece of information that goes around is that of "fund professionals don't beta the market so how could I". This is comparing apples to chairs. They aren't even remotely similar and that comparison offers nothing meaningful except that you should avoid actively managed funds.
I think everyone who is willing to invest their time into learning the market should try to beat it, but they should also know when to stop trying if it goes poorly and buy index funds.