… is paying someone to manage your investments.
1. The average stock trader can’t beat the average return. This is tautologically true; that’s what the average means.
2. There are many, many professional stock traders, many of whom wield portfolios measuring in the billions. This is an empirical fact, which is easily verifiable.
3. The best stock traders charge extremely high fees. John Paulson made $5 billion in fees in 2010. Every dollar earned by traders is one dollar less earned by the portfolio under management.
Two things follow from these propositions. First, if you are an amateur stock trader, you won’t beat the market, except by luck. Simply put, there are tens of thousands of people who do this for a living and when professionals go head to head with amateurs, the amateurs usually lose. Second, a large number of professional stock traders will not beat the average market return. To wit, 49.999999% of them won’t. Third, after accounting for fees, almost no one beats the average market return. From a casual investor paying a mediocre stock broker 1% to manage their portfolio to the hardcore wealthy paying 20% to a hedge fund, they will all lose compared to an index fund. Not only can’t you pick stocks which will beat the market, you can’t even pick mutual funds or hedge funds which can beat the market.
Read this article. Investing is not about being smart. In 1994, Long Term Capital Management was founded with two economics Nobel prize winners. They were bankrupt in a mere 4 years, because they were wrong about the EMH.
If you are not a professional financier, do not waste your time buying individual stocks or other investment vehicles. Anyone telling you to buy XYZ Stock is trying to scam you, nothing more nothing less. If they truly thought the stock would go up, why aren’t they buying it themselves? The truth is anyone spending their time telling other people what to buy is unwilling to put their money where their mouth is. If you really thought a stock was more valuable than its market price, you’d actually want other people not to buy it, because then you would be able to get it at a lower price. Don’t fall for an investment scam, and all investment advice is a scam.
Only those of you who follow my blog very closely know that linguistics is an interest of mine, but only when I’m annoyed. I suppose my German blood runs a bit too thick, but I believe that language, like everything else in the universe, should follow rules. That doesn’t mean that I think it does, only that is should.
Declension of “to be”
1st singular: I am
2nd singular: you are
3rd singular: he/she/it is
1st plural: we are
2nd plural: ya’ll are (either use thou, use ya’ll, or GTFO)
3rd plural: they are
Now add a not and use a contraction
Am not -> ain’t
are not -> aren’t
is not -> isn’t
(plural) are not -> aren’t
Now for whatever reason, the Gods of pedantry have decided that one declined version of a contraction isn’t a word (or is slang), but the others are. I’m ok with people saying “all contractions are slang, and thus not real words.” But don’t just pick one out of the line up for execution. Otherwise, I’m'n’t going to be happy.
Bob Murphy writes, “Surely to actually “win” the War on Poverty would mean that the government could stop spending money, because every household were self-sufficient. The criterion can’t be, “After you account for how much money we’re still throwing at it, the net result is better.”” and presents this chart:
The poverty rate in the U.S. is measured as pre-tax pre-transfer income (the green line). I’ve always thought that was silly because one’s actual living standard depends only on post-tax post-transfer income. If we care about how actual poor people are living, only the black line in the chart matters.
A “War on Poverty” centered on transfers only makes the green line increase! One of the fundamental principles of economics is that people respond to incentives. If you pay people who don’t work, people will respond by working less. People who work less earn less. Economists call this the marginal tax rate. Even if you don’t actually pay any taxes, if you lose a welfare benefit by working, it encourages you not to work just as if you had been taxed for working.
To reduce the green line to 0%, I have a modest proposal: anyone who doesn’t earn more than the poverty line will be tortured to death. I guarantee that after a few years, there will be no more poor people! But that’s ridiculous. No one wants a policy which reduces measured poverty if it means reducing the living standard of the poor.
While I’m sure there are still people living in deprivation, the average person living under the U.S. poverty line has plenty to eat, has air conditioning, a car, cable TV or internet access, and other amenities. Since poverty is an inherently relative concept, “winning the war on poverty” shouldn’t include reducing the measured poverty rate to zero.
Fighting poverty will always be a continuous thing. As societal norms change, the amount of resources will change to match them.