Prepare for Battle

Tscm_1The latest “Apprentice Investor” column is up at the free site part of  It looks at who your competitors are in the market: Prepare for Battle.

Here’s an excerpt:

It’s important to understand who your opponents are on the field of battle.
Sports and war metaphors abound, because they are consistent with what you are
going up against. Yes, you are up against Mr. Market, but your rivals are also
other people buying and selling stocks. They, too, are looking to produce
positive returns.

, who oversees the $10 billion endowment fund at Yale University, once

“Watch a pro football game, and it’s obvious the guys on the field
are far faster, stronger and more willing to bear and inflict pain than you are.
Surely you would say, ‘I don’t want to play against those guys!’

Well, 90% of stock market volume is done by institutions, and half of that is
done by the world’s 50 largest investment firms, deeply committed, vastly well
prepared — the smartest sons of bitches in the world working their tails off
all day long. You know what? I don’t want to play against those guys

That’s a brutal and, in my opinion, absolutely spot-on observation.

Prior columns can be found here.



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  1. David Bennett commented on May 11

    I think you were wrong to calllongterm investing as opposed to medium tern or short term (trading) a zero sum game. Historically the market has paid roughly 6% (it seems to be gnp growth and inflation) plus dividends over time. These are decent odds.

    The caveats of course are time frames, but for a 25 year old putting a couple a hundred a month in a wide ranging index for the next 40 years is (based on history) going to be a pretty successful strategy. Medium term strategies are a lot more troublesome because there have been fairly long periods when highs did not chance significantly, though the Boogle method does claim if you invest frequently you catch a lot of lows pushing up the average. But a lot of times in the problem eras you don’t have a zero sum game either, you have a negative sum game were there is less money at point b than there was at point a. Most of that sum was not taken out ond put into someones pockets, it dissapeared when valuations fell.

  2. brian commented on May 12

    you say that amateur investors have little chance of beating the market. While that is true, so is it that most professional investors cannot beat an invesment portfolio of simply index funds/etfs made up of 70% to Wilshire 5000 index and 30% to the Lehman bond agg. index.

  3. Barry Ritholtz commented on May 12

    Actually, you may have missed the main point. Reread the column.

    I note that pros as well as individuals underperform the S&P each year. And I suggested indexing last week for those who want a low maintenance investment strategy.

    The point is that anyone who becomes a self-directed investor should understand what they are going up against . . .

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