Do you not think “beating the market” is zero-sum?
No, at least not without a whole bunch of additional qualifications.
Two simple examples. Let’s assume the “market” is S&P500.
Example 1: I leverage my investment 2:1 and buy and hold the market. A year passes, the market return was positive, my return was twice as big as the market return. I beat the market—who lost?
Example 2: I do not invest and stay in cash for the whole year. The market return was positive, I underperformed the market and so lost—who won?
I’ll write the cute answer (for other’s benefits, since I expect you’ve thought of it).
Mr. Example2 decided to duck out of the market this year and sells his 1 share of SPY for $100. He keeps the cash at his brokerage, and gets 1% interest. Fleeing to cash turned out to be a bad deal for his portfolio—Mr. Example2 “lost”.
What did Mr. Examples’s brokerage do with his $100 in cash? Why, they lent it to Mr. Example1! Mr. Example1 borrowed $100 to buy a share of SPY (from Mr. Example1). The broker charged Mr. Example1 1% interest, which they pass on to Mr. Example2. This leverage turned out to be a great idea for Mr. Example1′s portfolio—Mr. Example1 “won”.
So the cute answer to you questions is “the guy from the other example”.
(But I don’t think this the root of the issue, so let’s move to a different thread leaf)
No, at least not without a whole bunch of additional qualifications.
Two simple examples. Let’s assume the “market” is S&P500.
Example 1: I leverage my investment 2:1 and buy and hold the market. A year passes, the market return was positive, my return was twice as big as the market return. I beat the market—who lost?
Example 2: I do not invest and stay in cash for the whole year. The market return was positive, I underperformed the market and so lost—who won?
I’ll write the cute answer (for other’s benefits, since I expect you’ve thought of it).
Mr. Example2 decided to duck out of the market this year and sells his 1 share of SPY for $100. He keeps the cash at his brokerage, and gets 1% interest. Fleeing to cash turned out to be a bad deal for his portfolio—Mr. Example2 “lost”.
What did Mr. Examples’s brokerage do with his $100 in cash? Why, they lent it to Mr. Example1! Mr. Example1 borrowed $100 to buy a share of SPY (from Mr. Example1). The broker charged Mr. Example1 1% interest, which they pass on to Mr. Example2. This leverage turned out to be a great idea for Mr. Example1′s portfolio—Mr. Example1 “won”.
So the cute answer to you questions is “the guy from the other example”.
(But I don’t think this the root of the issue, so let’s move to a different thread leaf)
1) The person who lent you the money, and who could instead have invested it the same way you did.
2) The person who bought the stock you could otherwise have bought.
Edit: Solipsist’s answer is better than mine.