Imagine your friend invites you out to play a friendly game of poker. You agree to go, because why not, right? Should be fun!
Once you sit down at the table that evening, you find out that the players you’ve just sat down with are the best poker players in the world. They are the stars from the World Series of Poker - each of them accumulating millions of dollars in winnings.
Like your chances to win the game? That’s rhetorical.
This is the world of investing - or at least it used to be the world of investing before the internet. Information traveled slowly and these managers held the keys to the Kingdom of Alpha as a result. But things changed.
Now imagine that these players do you a favor and everyone agrees to play with their cards face up. What do you think of your chances to win now? I hope that’s still rhetorical.
I know for me, I might win a hand thanks to pure luck, but I know my chances of winning the game would still be zero for a couple of reasons.
One - I don’t know the odds of winning based on the two cards I’m holding plus the cards on the table. They know within a second of seeing their cards.
And two - since everyone is playing face up, each of them know the odds of everything. So even for them, it’s come down to pure luck of the draw.
As for me, I’m toast.
This is the world of investing today. All information is publicly disseminated via the internet in seconds. All the players at the table are all the professional investment managers around the world with limitless information at their fingertips. And they are living, eating and breathing the markets.
Here’s the kicker - despite all the shows of ego, for all but a select few of these managers (of whom no one can know who they’re going to be in advance), it still comes down to pure luck of the draw because (theoretically) all information is available to everyone. The cards are face up.
You’re still you though - doing your investments in your spare time. What do you think your odds are to beat the market?
I’ll let you decide.
This story illustrates exactly why I advocate for passive investing for my clients and I hope you’ll consider it for yourself as well.
Thanks for reading!
If you’re looking for a retirement planner to help you make a comfortable transition into retirement and want to see if we’re a good fit, reach out to me here.
Disclaimer: Any opinions are those of Ashby Daniels and not necessarily those of Raymond James. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete. Expressions of opinion are as of this date and are subject to change without notice. Investing involves risk and you may incur a profit or loss regardless of strategy selected.