I don’t disagree at all (I have no individual stocks, only indexes). The average retail investor doesn’t beat the market.
However, the top 10% of retail traders actually can generate consistent returns.[1]
Consider that MSFT has gone up 10x over the last ten years while the S&P has risen 4x. Ethereum has risen 2500x in that period. TSLA has risen 270x.
Not saying these returns are typical, but I can imagine that a highly aggressive retail investor could, with a few good trades and a lot of confidence, do incredibly well and end up with a life-altering amount of money. Obviously, the chances of both entering AND exiting the trades to capture all of that is low.
Again, not my style, but I respect those who want to place their bets.
> Not saying these returns are typical, but I can imagine that a highly aggressive retail investor could, with a few good trades and a lot of confidence, do incredibly well and end up with a life-altering amount of money. Obviously, the chances of both entering AND exiting the trades to capture all of that is low.
The problem is the existential question of knowing whether you are good (in absolute and relative terms) or not:
> For example, any competent basketball coach could tell you whether someone was skilled at shooting within the course of 10 minutes. Yes, it’s possible to get lucky and make a bunch of shots early on, but eventually they will trend toward their actual shooting percentage. The same is true in a technical field like computer programming. Within a short period of time, a good programmer would be able to tell if someone doesn’t know what they are talking about.
> But, what about stock picking? How long would it take to determine if someone is a good stock picker?
> An hour? A week? A year?
> Try multiple years, and even then you still may not know for sure. The issue is that causality is harder to determine with stock picking than with other domains. When you shoot a basketball or write a computer program, the result comes immediately after the action. The ball goes in the hoop or it doesn’t. The program runs correctly or it doesn’t. But, with stock picking, you make a decision now and have to wait for it to pay off. The feedback loop can take years.
> And the payoff you do eventually get has to be compared to the payoff of buying an index fund like the S&P 500. So, even if you make money on absolute terms, you can still lose money on relative terms.
However, the top 10% of retail traders actually can generate consistent returns.[1]
Consider that MSFT has gone up 10x over the last ten years while the S&P has risen 4x. Ethereum has risen 2500x in that period. TSLA has risen 270x.
Not saying these returns are typical, but I can imagine that a highly aggressive retail investor could, with a few good trades and a lot of confidence, do incredibly well and end up with a life-altering amount of money. Obviously, the chances of both entering AND exiting the trades to capture all of that is low.
Again, not my style, but I respect those who want to place their bets.
[1] https://www.bus.umich.edu/pdf/mitsui/nttdocs/coval-shumway2....