No Statistics Can Help You Outperform the Market
There are statistics for everything, especially for investing. Writers and financial experts love to spot little things from the markets and claim that they mean something BIG and EXPLOSIVE to the state of the economy – and now that you know that too, you have a kind of investment advantage. (If you’ve been paying attention to all of these messages, there are about a million different indicators flashed that a recession is “imminent” in the last few years, and, well.) If you want, you can get market information down to the second .
But there are no statistics to help you beat the market all the time. There are too many variables and nobody knows what the market will do. As Michael Batnik notes in his post on the inappropriate investor , Jack Bogle wrote in his book Enough :
The numbers are not true. At best, they are a pale reflection of reality. At its worst, it is a gross distortion of the truths we seek to measure.
There is enough information for you to spend all your time analyzing statistics in order to “optimize” your investment. “The reason some people eat this is because it creates the illusion that we are living in a world where the future will resemble the past,” Batnik writes. But predicting the market, like life, is impossible.
This is not to say that you shouldn’t be familiar with its ebb and flow (after all, this is the information we use to tell people to invest in low-cost mutual funds), but you shouldn’t need to overdo it. statistics that have no real relation to the future. As Ben Carlson, director of institutional asset management at Ritholtz Wealth Management writes :
Market history research can be helpful for several reasons:
- It can help you prepare for a wide variety of results.
- He can show you how human nature can go to extremes.
- This allows you to think about the future probabilistically, based on present circumstances.
- This helps in the wait setting process.
- This proves that almost everything in the markets is cyclical.
But studying the history of the market does not give:
- Help to look into the future.
- Tell us exactly how investors will react in certain conditions.
- Show me how to avoid overconfidence.
- Consider the fact that markets are constantly evolving.
- Teach you to deal with situations that have never happened before.
- Give you a map of future market returns.
Being an informed investor is important, but there are no statistics that tell you what the market is going to do next. Embrace uncertainty.