Active vs Passive Investing
The cluster discusses whether smart or average individuals can beat the stock market through active investing or stock picking, versus the safer approach of passive index funds, emphasizing that even professionals rarely outperform the market.
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What do “more smart people” invest in, and how well do they understand it?
Yes, investors are just people. Some of them smart, some of them less so.
But that doesn’t mean investors can’t be stupid
People choose to behave foolishly all the time. It's not hard to follow a rule "I am not smart enough to guess profitable investments, and I should invest only in simple things like major investment funds". If you can not figure out this rule yourself, there are literally hundreds of "for dummies" books and thousands of advisors that would tell you. If you think you can do better, it's your choice. You may be right, or you may be revealed as a fool - in any case, th
Investing is not even remotely a single domain, unless you constrain it down to something fairly trivial like making minority investments in publicly traded US common stocks where being smarter doesn't really count for much. There is so much trading activity now that the markets have become quite efficient. In order to consistently generate alpha as an investor like Warren Buffet you need access to material nonpublic information (proprietary research), or some form of structural advantage.
Statistically, professional investors don't beat the market. People aren't "downvot[ing] what they don't understand", they're downvoting demonstrably poor advice.
That's called "thinking you're smarter than everyone else." That's not the same as being intelligent. You can read about and learn how to intelligently invest your money over the desired time period for the goal you have. And if you have a long time period, you can read that you're most likely to succeed by dumping it in a total stock market index fund!
What if they aren’t the world’s smartest investors
From what I can tell almost no professional investers beat the market, almost nobody wins the lottery. Why should I listen to lottery players or professional wall street gamers?
You're thinking about your personal investments, not someone managing a large investment firm or hedge fund. This simple fixes for your personal investments would be seen as absolutely insane in the professional investment world. You can't just tell your clients "oh I put $100 Billion into some nearly 0% interest investments because I think the market is crazy", especially if the DJIA is having record months. Even the people managing your 401k are expected have a steady read