How To Beat Financial Experts

The fact of the matter is that you’re unlikely to find a better-performing fund or an investor who can consistently beat the market. Why, then, are some funds so alluringly compelling? It’s simple—some managers do beat the market (short -term), and many investors are lucky. However, they rarely, if ever, continue to do so consistently. In this article, you’ll learn how to beat financial experts, so you won’t have to hire one anymore.

No One Can Ever Predict The Market

Let’s take a simple example of an unscrupulous scammer who wants to sell his financial services to some naive investors.

He emails ten thousand people, telling half that Stock A will go up and telling the other half Stock B will go up. “This is just a freebie email to demonstrate my insider knowledge,” he might say. After a couple of weeks, he notices that Stock A has indeed gone up by chance.

He eliminates the Stock B group and focuses on the Stock A group, emailing them an “I told you so” note. This time, he splits the mailing in half again. Twenty-five hundred people are told about Stock C and twenty-five Hundred are told about Stock D. If either C or D goes up, on the next cycle, at least 1,250 people will have seen him pick two stocks successfully. And each cycle will make the recipients increasingly awed by his “ability.”

Because we like to create order where there is none, we will ascribe magical stock-picking abilities to the scammer—even though it was literally by chance—and buy whatever “investment success kit” he’s selling. The same is true of the pages of “five-star funds” you see. Moral of the story: Don’t trust purchased financial expertise just because of a few impressive stats.

I Bet You Don’t Need a Financial Adviser

If you’re looking for an expert who can help you invest, you just have to keep this in mind: you’ll be better off self-managing than seeking out a financial advisor.

Some of you might say,…

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