Saturday, December 16, 2006

Wanna control the market?

Read this insight By Flexo: Rule for building wealth: Don't try to beat the market. Some excerpts:

If the professionals—people who spend hours each day studying the markets—can’t do it consistently, why do you think you can? Sure, there are success stories, but they are anecdotes, not true representations of what trading in the stock market is really like.

Survivorship bias also shows that we’ll hear about success stories much more often than we’ll hear about failures, leading towards more misunderstanding of the way markets work.

Matching the market does not mean you’ll receive average returns. Considering most fund managers don’t beat indexed mutual funds, matching the market will exceed the average.

Fortune says, “The most straightforward way to avoid this trap is to diversify your assets and then rebalance your portfolio at least once a year.”
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