vania-janet/multiturn-rag-retrieval-data huggingface dataset:
"RED FLAG. You should not be invested in 1 share. You should buy a diversified ETF which can have fees of 0.06% per year. This has SIGNIFICANTLY less volatility for the same statistical expectation. Left tail risk is MUCH lower (probability of gigantic losses) since losses will tend to cancel out gains in diversified portfolios. Moreover, your view that ""you believe these will continue"" is fallacious. Stocks of developed countries are efficient to the extent that retail investors cannot predict price evolution in the future. Countless academic studies show that individual investors forecast in the incorrect direction on average. I would be quite right to objectively classify you as a incorrect if you continued to hold the philosophy that owning 1 stock instead of the entire market is a superior stategy. ALL the evidence favours holding the market. In addition, do not invest in active managers. Academic evidence demonstrates that they perform worse than holding a passive market-tracking portfolio after fees, and on average (and plz don't try to select managers that you think can outperform -- you can't do this, even the best in the field can't do this). Direct answer: It depends on your investment horizon. If you do not need the money until you are 60 then you should invest in very aggressive assets with high expected return and high volatility. These assets SHOULD mainly be stocks (through ETFs or mutual funds) but could also include US-REIT or global-REIT ETFs, private equity and a handful of other asset classes (no gold, please.) ... or perhaps wealth management products which pool many retail investors' funds together and create a diversified portfolio (but I'm unconvinced that their fees are worth the added diversification). If you need the money in 2-3 years time then you should invest in safe assets -- fixed income and term deposits. Why is investment horizon so important? If you are holding to 60 years old then it doesn't matter if we have a massive financial crisis in 5 years time, since the stock market will rebound (unless it's a nuclear bomb in New York or something) and by the time you are 60 you will be laughing all the way to the bank.
Buying pressure means there are more interested buyers than there are ready sellers putting upward pressure on prices. That might include institutional buyers who are slowly executing buy orders because they still want the best prices possible without clearing out the market. Buying pressure doesn't have to be related to volume at all. If everyone who owns shares think they are going to be worth far more than recent market prices, they will not offer them for sale. That means there is more demand to buy than there is a supply of shares to be bought. That condition can exist regardless of trading volume.
;-) Especially when salespeople and publications and TV are telling you over and over and over that you need to know a bunch of crap and do a bunch of things. People who have a profitable ""business of me"" are the ones who end up with a lot of money. Not people who spend a lot of time screwing with investments. (People who get rich investing invest professionally - as their ""business of me"" - they don't goof around with their 401k after work.) Financial security is all about your savings rate, i.e. your personal profitability. No shortcuts, other than lotteries and rich uncles."
Perhaps to mitigate against information risk, in the sense that information may come up that changes your outlook on the market and also the value of your investments, so DCAing stops you from going all in now and having your entire amount decrease in value due to something you can't reasonably predict.
I think you are mixing two different concepts here. The average investor, in the quoted reference, means an average single investor like you or like me. the average investor consistently under-performs the market. However, you then ask the question and you seem to refer to all investors as a group; individuals, institutions, investment banks, et al. since together, investors own 100% of the stock in every company? Every investor could match the performance of the market easily and at low fees by simply buying an S&P index fund and holding it. In fact, some investors can even beat the market with the addition of some stocks. Here is the ten-year chart of Berkshire-Hathaway B compared to the S&P 500.   There are other examples. However, few of us have the discipline to do so. We read questions here every week about the coming turbulence in the market, about the next big trend, about the next bubble, etc. The average investor thinks he is smarter than the market and buys on a whim or sells likewise and misses out on the long, slow overall growth in the markets. Finally, the title of your question is “Dalbar: How can the average investor lose money?” I doubt that the average investor loses money in the past several years. Not making as much money as is easily possible is not at all the same as losing money.
"As ChrisInEdmonton describes, shorting has an asymmetric risk/reward ratio. And put options have a time cost, if you think the market is overvalued and buy lots of puts, but they expire before the market finally corrects, you can lose your entire investment. Betting on market timing of any kind is extremely difficult to do, some would argue it's impossible. ""The market can remain irrational longer than you can remain solvent"" is a favorite wall street trader saying. Instead of playing a game that's difficult to win, the better option is to play one you can win. That's to learn how to value individual investments well and accumulate cash until you can find investments that are under-valued to invest in. The best way to learn to value investments is to read Graham and Buffett. ""The Intelligent Investor"" is a good starting point, and you can read all of Buffett's investor letters for the last 30 years + for free on the Berkshire Hathaway web site. Finally the textbook on valuing stocks and other investments is ""Securities Analysis"" the 6th edition is only version to get, it was updated with Buffett and other leading value investors oversight. A basic overview of valuing investments is that every investment has an ""intrinsic value"" consisting of it's future cash flows, discounted for the time it takes to receive them. The skill is being able to estimate how likely those cash flows are to happen. a) Is it a good business? Does it have a moat, i.e. barriers that make it hard for competitors to duplicate it? b) Will management invest or distribute those cash flows wisely? Then your strategy is to not even worry about the market, spend your time looking at individual stocks and investments and wait until some come along that's well undervalued. That may be during a market correction, or it may be tomorrow. And it's not just good enough to intelligently value your investments, you also have to have psychological fortitude to not panic and to think for yourself. Buffett describes it best. Ben Graham, my friend and teacher, long ago described the mental attitude toward market fluctuations that I believe to be most conducive to investment success.
Any investor can make a bad bet, even Buffett. Even if you have done every bit of research on an investment possible you are exposed to random external events.. acts of god, and outright fraud.
Others have made excellent suggestions; one thing I would add - and this cannot be understated - is to assess your risk tolerance.  We tend to think of investing as a purely rational and financial decision, yet myself and so many others, when times get tough, make emotional decisions. Doing a risk tolerance test (as honestly as possible) will help you recognize what you can and can't handle.   On top of that, consider how well you face adversity or celebrations in other areas of life; I've found many similarities in the ways that we handle a gain in our investments to the way we celebrate a raise (same thing with adversity). Once you know this, you can begin the process of elimination on funds. [Added: the point above this, does not consume a lot of time and could end up saving you a great deal of money and emotional agony, so it's well-worth it.]
Unless and until you are ready to do the ground work and get your hands dirty in the market, it is better to let the money where it is. But how to distribute money in which asset classes, industry etc is your choice to make. But remember that a big investment company doesn't guarantee that you will always earn a return higher than the market or it is safe with them. They are also bound to make mistakes and go bust, but it would be quite rare for companies, with billions of assets because they have strict checks in place and invest with extreme caution and proper research. One option is to try dabbling in the markets yourself, slowly, not everything at once. You will learn a lot and there are loads of information on the net and books in stores which could get you started. You will need to do a lot of groundwork to beat the market. That is difficult but not impossible. People have done it time and time again and they have put in hard work to do so. And I don't see with a little bit of work and time, why you shouldn't be able to do that, unless and until you are lazy and don't intend to do it.
"Investing in a business can be daunting and risky, so it is not for everyone. The most common pitfalls are mentioned here:  Beyond that:  It all sounds a bit like ""Don't trust anyone"" and sadly, this is true when there's a lot of money involved. So be prepared and do your homework, this sometimes will save you more money than you gain with your investments :) Good luck!"
retail has been in a slump for quite a few years now.  these companies are short on cash, cut costs, take on debt to pay manufacturers and fund operating costs, products do not sell, short on cash, cut costs, take on debt again etc  go through this cycle enough times everyone starts to look for exits - banks want to get paid on the loans and retailers want to lower the debt service.  this usually ends up at the door step of a PE shop  these retailers are usually over levered by the time PE ships are involved.  PE adds its own tranches of debt and off to the races the retailers go  many retailers are figuring out consumers just are not interested in buying from them, no cash, cut costs, cannot service debt, Ch 11, likely end up on the doorsteps of another PE shop
It depends on the market that you participate in. Stock markets are not zero sum as JoeTaxpayer explained. On the other hand, any kind of derivative markets (such as options or futures) are indeed zero sum, due to the nature of the financial instruments that are exchanged. Those markets tend to be more unforgiving. I don't have evidence for this, but I believe one of the reasons that investors so often lose their money is psychology. The majority of us as humans are not wired to naturally make the kinds of rigorous and quick decisions that markets require, especially if day trading. Some people can invest time and energy to improve themselves and get over that. Those are the ones who succeed.
Some investors (pension funds or insurance companies) need to pay out a certain amount of money to their clients. They need cash on a periodical basis, and thus prefer dividend paying stock more.
In general, liquidity is a good thing, because it means it is easy for you to buy or sell a stock.   Since high liquidity stocks have a lot of trading, the bid-ask spreads tend to be pretty low.  That means you can go into the market and trade easily and cheaply at just about any time.  For low liquidity stocks, the bid-ask spreads can get pretty high, so it can make it hard or expensive to get into or out of your trades. On the flip side, everyone pays attention to high liquidity stocks, so it's harder to get an edge in your trading.  For a company like Microsoft there are 30-50 full time analysts that cover them, thousands of professional traders and millions of investors in general all reading the same new articles and looking through the same financials as you.  But in low liquidity stocks, there probably aren't any analysts, a few professional traders and maybe a few thousand total investors, so it can be easier to find a good buy (or sell). In general, high liquidity doesn't mean that everyone is selling or everyone is buy, it just means everyone is trading.
The main advantage and disadvantage I can see in a scenario like this are - how savvy and good an investor are you? It's a good way to create below-market average returns if you're not that good at investing and returns way above market average if you are...
"There seems to be a common sentiment that no investor can consistently beat the market on returns. What evidence exists for or against this? First off, even if the markets were entirely random there would be individual investors that would consistently beat the market throughout their lifetime entirely by luck. There are just so many people this is a statistical certainty. So let's talk about evidence of beating the market due to persistent skill. I should hedge by saying there isn't a lot of good data here as most understandably most individual investors don't give out their investment information but there are some ok datasets. There is weak evidence, for instance, that the best individual investors keep outperforming and interestingly that the trading of individual investors can predict future market movements. Though the evidence is more clear that individual investors make a lot of mistakes and that these winning portfolios are not from commonly available strategies and involve portfolios that are much riskier than most would recommend. Is there really no investment strategy that would make it likely for this investor to consistently outperform her benchmark? There are so, many, papers (many reasonable even) out there about how to outperform benchmarks (especially risk-adjusted basis). Not too mention some advisers with great track records and a sea of questionable websites. You can even copy most of what Buffet does if you want. Remember though that the average investor by definition makes the average ""market"" return and then pays fees on top of that. If there is a strategy out there that is obviously better than the market and a bunch of people start doing it, it quickly becomes expensive to do and becomes part the market. If there was a proven, easy to implement way to beat the market everyone would do it and it would be the market. So why is it that on this site or elsewhere, whenever an active trading strategy is discussed that potentially beats the market, there is always a claim that it probably won't work? To start with there are a large number of clearly bad ideas posed here and elsewhere. Sometimes though the ideas might be good and may even have a good chance to beat the market.
I think you're right, it is a big problem, and one without an apparant solution.  Because of the distributed nature of investors, it's difficult to organize them into a body that would seek and pay for suck ratings.  It's like a threesome principal agent problem.  In a perfect world, there would be more control exercised by investors.  But due to the manner in which the modern world saves, this is also very difficult.
"Although this has been touched upon in comments, I think the following line from the currently accepted answer shows the biggest issue: There is a clear difference between investing and gambling. The reality is that the difference isn't that clear at all. Tens of comments have been written arguing in both directions and looking around the internet entire essays have been written arguing both positions. The underlying emotion that seems to shape this discussion primarily is whether investing (especially in the stock market) is a form of gambling. People who do invest in this way tend to get relatively emotional whenever someone argues that this is a form of gambling, as gambling is considered a negative thing. The simple reality of human communication is that words can be ambiguous, and the way investors will use the words 'investments' and 'gambles' will differ from the way it is used by gamblers, and once again different from the way it's commonly used. What I definitely think is made clear by all the different discussions however is that there is no single distinctive trait that allows us to differentiate investing and gambling. The result of this is that when you take dictionary definitions for both terms you will likely end up including lottery tickets as a valid form of investment. That still however leaves us with a situation where we have two terms - with a strong overlap - which have a distinctive meaning in communication and the original question whether buying lottery tickets is an investment. Over on investorguide.com there is an absolutely amazing strongly recommended essay which explores countless of different traits in search of a difference between investing and gambling, and they came up with the following two definitions: Investing: ""Any activity in which money is put at risk for the purpose of making a profit, and which is characterized by some or most of the following (in approximately descending order of importance): sufficient research has been conducted; the odds are favorable; the behavior is risk-averse; a systematic approach is being taken; emotions such as greed and fear play no role; the activity is ongoing and done as part of a long-term plan; the activity is not motivated solely by entertainment or compulsion; ownership of something tangible is involved; a net positive economic effect results."
Many would recommend lump sum investing because of the interest gains, and general upward historical trend of the market.  After introducing DCA in A Random Walk Down Wall Street, Malkiel says the following: But remember, because there is a long-term uptrend in common-stock prices, this technique is not necessarily appropriate if you need to invest a lump sum such as a bequest. If possible, keep a small reserve (in a money fund) to take advantage of market declines and buy a few extra shares if the market is down sharply. I’m not suggesting for a minute that you try to forecast the market. However, it’s usually a good time to buy after the market has fallen out of bed. Just as hope and greed can sometimes feed on themselves to produce speculative bubbles, so do pessimism and despair react to produce market panics. - A Random Walk Down Wall Street, Burton G. Malkiel He goes on from there to recommend a rebalancing strategy.
"There was a time when everyone felt their goal was to beat the respective index they followed. But of course, in aggregate, that's a mathematical impossibility. The result was that the average say large cap fund, whose benchmark index would be the S&P, would lag on average by 1-2%.  A trend toward ETFs that would match the market had begun, and the current ETFs that follow the S&P are sub .1% expense.  For the fact that studies (Google ""Dalbar"" for examples) show the typical investor lags not by 1% or 2%, but by far more for reasons of bad timing, my own statement that ""I've gotten a return these past years of .06% less than the S&P"" would have been seen many years ago as failure, now it's bragging. It handily beats the typical investor and yet, can be had by anyone wishing to stay the course, keep the ETF very long term."
"Traditional banks don't put their money onto the stock markets. In fact, the economic crisis was in part caused by the fact that banks were placing money into higher-risk portfolios and doing just that: in the UK there has been a debate for the last few years specifically around ""firewalling"" retail and investment bank operations entirely.  What I was discussing was in the retail/consumer sector where the money comes in as mortgages &amp; secured loans and - slightly riskier - unsecured credit, credit cards, etc. In that model, you do not need to be a genius. If I lend you $20k to buy a car and you don't repay me my money plus 8%, I get the car and therefore am unlikely to be seriously out of pocket. The only thing I have to do is make sure I lend to people likely to repay more often than I do to those who will not. And that, well, that's something we've got a few hundred years of experience with...  If I walk onto the NYSE and start throwing around my cash at put option on exotic FX markets that are in turn responding to conditions almost impossible to truly understand, well, I'm sure we'd agree that it's hard to beat the market. That's why the investment banks who specialise in that market don't invest their own money: they make money from investing other people's cash. Clever guys.  So we need to understand here there are two very different kinds of banks, with two very different business models, and it was the mixing of them that led to the disaster we've seen. Firewalling them makes sense to me!  Communists who think banks are making money out of thin air don't seem to understand that, and so it's not surprising that they seem confused about what a bank is actually there for. Those who do get these two models must see that a retail bank is there to provide finance based on savings held and investment banks are there to help people invest in riskier markets. That does not mean they are ""magic"" or ""evil"".  Now, they might argue that fractional reserve banking is a problem. I would imagine many of them would prefer the credit union model instead, but that's a different debate: that's the mechanics and detail, not the institutional need for existence."
A pattern of high level people buying or selling is a sign, positive or negative. An individual, not so much. He can be selling to diversify, trying to keep his investments from being all in the company. He can be selling to pay his large bills. Same reasons any of us might be selling an investment to have cash to use.
"Great question! While investing in individual stocks can be very useful as a learning experience, my opinion is that concentrating an entire portfolio in a few companies' stock is a mistake for most investors, and especially for a novice for several reasons. After all, only a handful of professional investors have ever beaten the market over the long term by picking stocks, so is it really worth trying? If you could, I'd say go work on Wall Street and good luck to you. Diversification For many investors, diversification is an important reason to use an ETF or index fund. If they were to focus on a few sectors or companies, it is more likely that they would have a lop-sided risk profile and might be subject to a larger downside risk potential than the market as a whole, i.e. ""don't put all your eggs in one basket"". Diversification is important because of the nature of compound investing - if you take a significant hit, it will take you a long time to recover because all of your future gains are building off of a smaller base. This is one reason that younger investors often take a larger position in equities, as they have longer to recover from significant market declines. While it is very possible to build a balanced, diversified portfolio from individual stocks, this isn't something I'd recommend for a new investor and would require a substantial college-level understanding of investments, and in any case, this portfolio would have a more discrete efficient frontier than the market as a whole. Lower Volatility Picking individual stocks or sectors would could also significantly increase or decrease the overall volatility of the portfolio relative to the market, especially if the stocks are highly cyclical or correlated to the same market factors. So if they are buying tech stocks, they might see bigger upswings and downswings compared to the market as a whole, or see the opposite effect in the case of utilities. In other words, owning a basket of individual stocks may result in an unintended volatility/beta profile. Lower Trading Costs and Taxes Investors who buy individual stocks tend to trade more in an attempt to beat the market. After accounting for commission fees, transaction costs (bid/ask spread), and taxes, most individual investors get only a fraction of the market average return.