This resoning works good if I assume that I have average IQ—and so my predictions are averege and so I should not try to predict the market. But most people think that they are smarter then most people. So do the traders.
Smartest traders can first notice trends in psevdorandom enviroment. But most traders mistakenly think that they are smartest.
There are some pretty smart traders. But there is also a lot of dumb money.
The classic example of this was Peter Lynch, a legendary stock trader. His fund ( Magellan) outperformed the market greatly, especially in the early years. But if you weight his returns by the capital in his fund, it actually underperformed.
What this means is that the investors in his fund managed to more than completely negate his stock-picking skill by adversely timing their entries and exits from his fund. Amazing!
This resoning works good if I assume that I have average IQ—and so my predictions are averege and so I should not try to predict the market. But most people think that they are smarter then most people. So do the traders.
Smartest traders can first notice trends in psevdorandom enviroment. But most traders mistakenly think that they are smartest.
There are some pretty smart traders. But there is also a lot of dumb money.
The classic example of this was Peter Lynch, a legendary stock trader. His fund ( Magellan) outperformed the market greatly, especially in the early years. But if you weight his returns by the capital in his fund, it actually underperformed.
What this means is that the investors in his fund managed to more than completely negate his stock-picking skill by adversely timing their entries and exits from his fund. Amazing!