Is it that hard to beat the market?

Hi Guys,

Just wondering, is it that hard to beat the market consistently? I met this guy today and he said he has being getting 30-100% returns for the last 7 years, No losing years. Sounds fishy, I thought he was lying right away but I mean it might be possible. Anyways his hosting investment seminars and charges $20 for it.

Just curious

It was possible until I read this part.

can anyone share like some success stories? I mean I can only get “you will most likely underperform the market even though I Googled what percentage of people outperform the market”.

It’s possible but I would stay away from guys who claim those kinds of returns and hold seminars. You are better off listening to the “I only invest in real estate. It never goes down” guys.

Well put it this way, if someone really had outperformed the market by that extent over the last 7 years they would most likely be extremely wealthy. So why would someone with such a track record be scrounging around trying to hussle $20 out of people? What you have encountered here is most likely a snake oil merchant.

And to answer your initial question, it is extremely difficult to beat the market (assuming you mean stock market) consistently over time. Anyone who tells you it is easy is either trying to mislead you or is naive and I would be wary of their advice either way.

Maybe that $20 per head is counted in his ROI.

My thoughts exactly.

An interesting point is that monkeys throwing darts at a board should outperform something like the S&P 500 on average.

Why? Because their sample will be biased towards small-cap stocks (the S&P 500 has about 75% of the US market capitalization, but only 500 stocks, compared to the 1000s of stocks in the R1k, R3k, Wilshire 5000, etc), and the small cap universe tends to deliver higher returns on average.

So it may not be too hard to beat the market over the long term by a little, but it does seem to be pretty hard to beat it by a lot. One of the challenges is to figure out how much of the performance difference comes from buying high-beta stocks in an up market, versus finding stuff that outperforms an equivalently-levered index.

One of my finance professors in grad school did a study showing that it would be almost statistically impossible for there to NOT be someone who outperforms the market for 10 years straight just by sheer chance.

I like this idea a lot. Set up a mutual fund, benchmark it to the S&P500, implement a small-cap bias, slightly outperform the S&P 500 for 3 years until you have established that arbitrary track record for other monkeys, er, consultants and fund selectors, and then sit back and watch the mandates roll in. After all, nobody really expects any excess return from domestic large cap stocks in the long run, do they? Small sustainable excess returns in LCD equity land is something special. Of course, do not shine any special light on the small cap bias to any consultants reviewing your fund.

^ good idea as long as you do it during a bull market. In a bear market, the opposite occurs. Small cap underperforms.

It’s easier to beat the market when you don’t tell the truth, harder when you do.

this guy beat the market 10 years in a row

Right. It’s one of those strategies that tends to work only over full business cycles. But stocks to tend to go up over the long term, because people discount the present value and that creates the return (except when they don’t discount it by enough).

So for only $20, you get to listen to one of his lieutenants give a canned speech, and at the end, they’ll let you sign up for the “real” workshop for the low low price of $1295. But don’t worry if you don’t have it now–all major credit cards accepted.

People who pay 20 dollars to join the seminar are the reason why Bernie Madeoff was allowed to exist for so long.

Making a return of 30-100% for the last few years is possible . Pls check the credentials and then believe in the seminars

^ Another gem.

Give us more!!!

^^Lol. It was possible to make 1000% if you picked the right small caps…

Have you guys ever read this book? One of the dude’s comments were like “I’ve beaten the market conistently every year, average compound return is 70%” or something stupid like that.

Hands down worst book on investing i’ve ever read.

Active investing is a zero sum game. For you to outperform the market someone else had to underperform. People who typically do active investing will typically use solely for research, hundreds of thousands ,and in some cases like Ray Dalio, millions of dollars to try and outperform the market. When people tell you they are able to outperform, it is very likely it is not consistent or they have a little amount of data (less than 10 years). Alpha is typically concentrated to the top investors with a huge budget dedicated to research at the expense of the little guy who believes they can outperform the market. 30% to 100% every year for the past 7 years is a little bogus. Given that CAGR for that approximate time period ~6%. If you had returns that outpeformed by that much, I would not share it for $20, I would use my own money or find a company to hire me and use their money to generate those returns. I’d have him checked if i were you.