vania-janet/multiturn-rag-retrieval-data huggingface dataset:
"I feel that OP's question is fundamentally wrong and an understanding of why is important. The stock market, as a whole, in the USA has an average annualized return of 11%. That means that a monkey, throwing darts at a board, can usually turn 100K into over three million in thirty-five years. (The analog I'm drawing is a 30-year old with 100K randomly picking stocks will be a multi-millionaire at 65). So to be ""good"" at investing in the stock market, you need to be better than a monkey. Most people aren't. Why? What mistakes do people make and how do you avoid them? A very common mistake is to buy high, sell low. This happened before and after the 08's recession. People rushed into the market beforehand as it was reaching its peak, sold when the market bottomed out then ignored the market in years it was getting 20+% returns. A Bogle approach for this is to simply consistently put a part of your income into the market whether it is raining or shining. Paying high fees. Going back to the monkey example, if the monkey charges you a 2% management fees, which is low by Canadian standards, the monkey will cost you one million dollars over the course of the thirty-five years. If the monkey does a pretty good job it is a worthy expenditure. But most humans, including professional stock pickers, are worst than a monkey at picking stocks. Another mistake is adjusting your plan. Many people, when the market was giving bull returns before the 08's crash happily had a large segment of their wealth in stocks. They thought they were risk tolerant. Crash happened, they moved towards bonds. Then bonds returns were comically low while stocks soared. Had they had a plan, almost any consistent plan, they'd have done better. Another genre of issues is just doing stupid things. Don't buy that penny stock. Don't trade like crazy. Don't pay 5$ commission on a 200$ stock order. Don't fail to file your taxes. Another mistake, and this burdens a lot of people, is that your long-term investments are for long-term investing.
and I'm convinced that there is much inefficiency in the market. These Graham-and-Doddsville investors have successfully exploited gaps between price and value. When the price of a stock can be influenced by a ""herd"" on Wall Street with prices set at the margin by the most emotional person, or the greediest person, or the most depressed person, it is hard to argue that the market always prices rationally. In fact, market prices are frequently nonsensical. and finally Success in investing doesn’t correlate with I.Q. once you’re above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing. There is almost no information on any who has helped Buffett internally or even managed Berkshire's investments aside from Louis Simpson. It is unlikely that Buffett has allowed anyone to manage much of Berkshire's investments considering the consistent stream of commentary from him claiming that he nearly does nothing except read annual reports all day to the extent that he may have neglected his family to some degree and that listening to others will more likely hurt performance than help with the most striking example being his father's recommendation that he not open a hedge fund after retiring from Graham-Newman because he believed the market was topping, and he absolutely idolized his father."
Instead of buying in bulk, I invest the money in equity mutual funds, for an expected return of 12%, which is more than inflation. So, I make more returns. But at the cost of a slight risk, which I'm comfortable with.
That is such a vague statement, I highly recommend disregarding it entirely, as it is impossible to know what they meant. Their goal is to convince you that index funds are the way to go, but depending on what they consider an 'active trader', they may be supporting their claim with irrelevant data Their definition of 'active trader' could mean any one or more of the following: 1) retail investor 2) day trader 3) mutual fund 4) professional investor 5) fund continuously changing its position 6) hedge fund. I will go through all of these. 1) Most retail traders lose money. There are many reasons for this. Some rely on technical strategies that are largely unproven. Some buy rumors on penny stocks in hopes of making a quick buck. Some follow scammers on twitter who sell newsletters full of bogus stock tips. Some cant get around the psychology of trading, and thus close out losing positions late and winning positions early (or never at all) [I myself use to do this!!]. I am certain 99% of retail traders cant beat the market, because most of them, to be frank, put less effort into deciding what to trade than in deciding what to have for lunch. Even though your pension funds presentation is correct with respect to retail traders, it is largely irrelevant as professionals managing your money should not fall into any of these traps. 2) I call day traders active traders, but its likely not what your pension fund was referring to. Day trading is an entirely different animal to long or medium term investing, and thus I also think the typical performance is irrelevant, as they are not going to manage your money like a day trader anyway. 3,4,5) So the important question becomes, do active funds lose 99% of the time compared to index funds. NO! No no no. According to the WSJ, actively managed funds outperformed passive funds in 2007, 2009, 2013, 2015. 2010 was basically a tie. So 5 out of 9 years. I dont have a calculator on me but I believe that is less than 99%!
There are a few main economic reasons given why investors show a strong home bias: Interestingly, though if you ask investors about the future of their home country compared with other countries they will generally (though not always) significantly overestimate the future of their own country.  It is difficult to definitively say what drives investors but this psychological home bias could be one of the larger factors. Edit in response to the bounty: Maybe this Vanguard article on their recommended international exposure is what you are looking for though they only briefly speculate about why people so consistently show a home bias in investing.  The Wikipedia article mentioned above has some very good references and while there may be no complete answer with the certainty that you seek (as there are as many reasons as there are investors) a combination of the above list seems to capture much of what is going on across different countries.
It's interesting these days, I see a lot of daily deals startups taking investor money and inevitably failing...  It's a long con the other way, too - a steady paycheck for a few years with the knowledge that no amount of effort will save the company because the entire concept is wrong. Pivoting ten or twelve times just to suck more cash out of the gullible...
It could be an endless number of reasons for it.  It could simply just be a break through a long term resistance causing technical traders to jump in.  It could be an analyst putting out a buy recommendation.  If fundamentals have not changed then maybe the technicals have changed. Momentum could have reached an oversold position causing new buyers to enter the market. Without knowing the actual stock, its fundamentals and its technicals, no one will ever know exactly why.
Your question has 6 questions marks along with comments on what you'd like to know.  Yes, there are stocks that are tough to short, a combination of low float, high current short positions, etc. Interest charged on the position rises in a supply/demand fashion.  To unwind the position, there's always going to be stock available to buy. A shortage of willing sellers will cause the price to go up, but you'll see a bid/ask and the market will clear, i.e. The buy order fills.
Operationally they wouldn't be too bad off if not for their debt. With declining sales and powerful competitors, they lack the cash flow to both compete and pay off their debt as it matures and while they've been able to refinance so far the doom and gloom outlook that some investors have right now on retailers makes it harder. If they could restructure they would come out in pretty decent shape though.
Consistently beating the market by picking stocks is hard. Professional fund managers can't really do it -- and they get paid big bucks to try! You can spend a lot of time researching and picking stocks, and you may find that you do a decent job. I found that, given the amount of money I had invested, even if I beat the market by a couple of points, I could earn more money by picking up some moonlighting gigs instead of spending all that time researching stocks. And I knew the odds were against me beating the market very often. Different people will tell you that they have a sure-fire strategy that gets returns. The thing I wonder is: why are you selling the information to me rather than simply making money by executing on your strategy? If they're promising to beat the market by selling you their strategy, they've probably figured out that they're better off selling subscriptions than putting their own capital on the line. I've found that it is easier to follow an asset allocation strategy. I have a target allocation that gives me fairly broad diversification. Nearly all of it is in ETFs. I rebalance a couple times a year if something is too far off the target. I check my portfolio when I get my quarterly statements. Lastly, I have to echo JohnFx's statement about keeping some of your portfolio in cash. I was almost fully invested going into early 2001 and wished I had more cash to invest when everything tanked -- lesson learned. In early 2003 when the DJIA dropped to around 8000 and everybody I talked to was saying how they had sold off chunks of their 401k in a panic and were staying out of stocks, I was able to push some of my uninvested cash into the market and gained ~25% in about a year. I try to avoid market timing, but when there's obvious panic or euphoria I might under- or over-allocate my cash position, respectively.
There are many technical answers above , but the short story to me is that very few active fund managers consistently beat the market. Look at the results of actively managed funds. Depending on whose analysis you read, you will find out that somewhere between 80-90% of fund managers in a given year do not beat passive index funds. So go figure how you will do compared to a mutual fund manager who has way more experience than you likely have. So, that in itself is moderately interesting, but if you look at same-manager performance over several consecutive years it is rare to find anyone that goes beats the market for more than a few years in a row. There are exceptions, but go pick one of these guys/gals - good luck. Getting in and out of the market is a loser. This is because there is no way to see market spikes and down turns. There are many behavioral studies that have been done that show people do the wrong thing: they sell after losses have occurred and they buy after the market has gone up. Missing an up spike and not being in before the spike is as devastating as missing a down turn and not getting out in time. There is another down side, if you are trading in a personal account, rather than a tax deferred account, going in and out of stocks has tax complications. In short, a broad based equity index will, over time, beat about anything out there and it will do it in a tax efficient manner.  Exchange traded funds (ETFs) are a wonderful way to obtain diversification immediately at very low cost.
"How is it possible for the average investor to underperform the market? The ""average"" investor probably makes some bad decisions. You also might need to take transaction costs into play (including borrowing on margin), so that there's a natural ""erosion"" of returns across the market.  Meaning if transaction/borrowing costs are 1%, and the market return is 5%, the ""average investor""  Alternatively, if by ""average"" they mean the average of the population, not weighted by amount, it's plausible that the mass of smaller investors perform slightly worse than the smaller number of large investors (and have larger relative transaction costs), thus having a lower average on a per-capita basis. Doesn't the fact that investors can consistently underperform the market by making poor decisions, imply that an investor could consistently outperform the market by making the opposite decisions? No.  If my investment decisions cause me to earn only a 10% return compared to the ""average"" 12% return, then making the opposite decision will cause me to lose 10%, not to make 14%."
"common sentiment that no investor can consistently beat the market on returns.  I guess its more like very few investor can beat the market, a vast Majority cannot / do not. What evidence exists for or against this? Obviously we can have a comparison of all investors. If we start taking a look at some of the Actively Managed Funds. Given that Fund Managers are experts compared to common individual investors, if we compare this, we can potentially extend it more generically to others. Most funds beat the markets for few years, as you keep increasing the timeline, i.e. try seeing 10 year 15 year 20 year return; this is easy the data is available, you would realize that no fund consistently beat the index. Few years quite good, few years quite bad. On Average most funds were below market returns especially if one compares on longer terms or 10 - 20 years. Hence the perception Of course we all know Warren Buffet has beat the market by leaps and bounds. After the initial success, people like Warren Buffet develop the power of ""Self Fulfilling Prophecy"". There would be many other individuals."
"Another thing people forget is that you can only under perform the average (aka the index) if you try. For most things in life, the harder you try, the better you do. In investing, that is not true. You can lock in ""average"" by simply buying the index fund. If you try, but you don't work as hard as everybody else who is trying or if you are not as smart as everybody else who is trying, then you will be below average. If you try, and you do better research, you are intelligent, and most importantly more disciplined, you can beat the average. That is an awful lot of work to be a few percent above average. It's like a 100 man marathon race where you can choose to come in 50th place if you don't run, it definitely beats running 26 miles only to come in 70th place. Also, note the people who know they are not very skilled will choose to be non-participants. If you are in the top 30% percentile in skill, you'll get killed if 80% of the participants choose to sit out and you are competing with the top 20%. It becomes one of these funny game theory experiments where even if you know what your rank is, do you choose to sit out or not? (Or perhaps you will choose to participate when the shoe shine boy is giving out stock advice, and take the opposite side of the bet). For most people, it doesn't make sense to try. It makes the most sense to lock in the average by putting money into index funds (stocks and bonds) over time. It certainly beats doing several hours of work a week and then getting below average. It only makes sense to try to beat the average if you are really excited about stocks (it is your job or it is your primary hobby) and you have enough capital where getting that extra +3% return over the average is significant (otherwise, just work more on your day job and you'll make more money through wages). I really cannot stress the last point enough, I know some people who are very smart and they do a lot of research on the market, and they get pretty good percentage returns. So you have to be cheap as hell or rich as hell before it makes sense to invest your own money.
Most mutual funds underperform the stock market.  Of those that over-perform, much of the performance can be attributed to dumb luck.  Most mutual funds exist to generate fees from you, rather than make you wealthy.  In my opinion, if you want to invest in one, choose a no-load index fund, and you will outperform most other funds.  Better still get some good financial education and learn to manage your funds/investments yourself.
Exactly. There's not unlimited points out there. Classic innovation cycle where at the end the returns are ultimately directly correlated to capital and it is not particularly profitable for most market participants.   Incidentally, never understood why retail investors care about HFT. IF they squeeze a few basis points out of you getting in and out of a position, it's still way less than what brokers are taking you for. And if you're wearing it for years, should be basically noise relative to the overall performance.
I agree with the other answers, but I want to give a slightly different perspective. I believe that a lot of people are smart enough to beat the market, but that it takes a lot more dedication, patience, and self-control than they think. Before Warren Buffett buys a stock, he has read the quarterly reports for years, has personally met with management, has visited facilities, etc. If you aren't willing to do that kind of analysis for every stock you buy, then I think that you are doing little more than gambling. If you are just using the information that everyone else has, then you'll get the returns that everyone else gets (if you're lucky).
Day trading is probably the most often tried and failed activity in the financial world. People think they can parlay $1,000 investment into $1,000,000 in a week with little or no knowledge on how to evaluate stocks and or companies. They think they can just look at where the line graphs' been and forecast where it's going to be next week. Unfortunately if it were that simple everyone would be making money hand over fist in the market.   So in short, the reason day trading is considered a risky venture is because most of the people that attempt to do it are willfully ignorant. They intentionally choose not to read about day trading. They intentionally choose not to learn about how to read a company's financial report and they intentionally choose not to learn how to compare one stock to another. They also don't consider the fact that most of their data is 15 or more min old because of the shady rules brokers have worked into the system.  Real everyday investors that make money in the market do it by careful evaluation of the purchase they are about to make. Guess what, even they lose time to time. That's the game!
"I understand you make money by buying low and selling high. You can also make money by buying high and selling higher, short selling high and buying back low, short selling low and buying back even lower. An important technique followed by many technical traders and investors is to alway trade with the trend - so if the shares are trending up you go long (buy to open and sell to close); if the shares are trending down you go short (sell to open and buy to close). ""But even if the stock price goes up, why are we guaranteed that there is some demand for it?""  There is never any guarantees in investing or trading. The only guarantee in life is death, but that's a different subject. There is always some demand for a share or else the share price would be zero or it would never sell, i.e zero liquidity. There are many reasons why there could be demand for a rising share price - fundamental analysis could indicated that the shares are valued much higher than the current price; technical analysis could indicate that the trend will continue; greed could get the better of peoples' emotion where they think all my freinds are making money from this stock so I should buy it too (just to name a few). ""After all, it's more expensive now."" What determines if a stock is expensive? As Joe mentioned, was Apple expensive at $100? People who bought it at $50 might think so, but people who bought at $600+ would think $100 is very cheap. On the other hand a penny stock may be expensive at $0.20. ""It would make sense if we can sell the stock back into the company for our share of the earnings, but why would other investors want it when the price has gone up?"" You don't sell your stocks back to the company for a share of the earnings (unless the company has a share-buy-back arrangement in place), you get a share of the earnings by getting the dividends the company distributes to shareholders. Other investor would want to buy the stock when the price has gone up because they think it will go up further and they can make some money out of it. Some of the reasons for this are explained above."
I feel these beliefs can not be changed so easily. Once someone loses their money, how can you convince him? And on what ground can you convince him? Can you give a guarantee that investments will perform at a certain level? There are many people who are happy with low returns but highly safe instruments. They are not concerned with what you earn in the stock market or the realty market. They are happy not losing their money. I known many people who earned decently during the up-rise of the stock market but all profits were squared up in the downturn and it turned to negative. Such people have their own thinking and such thinking is not out of place. After experience with much turmoil, I feel that they are also right to a great extent. Hence I feel if the person is not getting convinced, you should accept it with greatness.
It is a general truism but the reasons are that the rules change dramatically when you simply have more capital. Here are some examples, limited to particular kinds of markets: Under $2,000 in capital Nobody is going to offer you a margin account, and if you do get one it isn't with the best broker on commissions and other capabilities. So this means cash only trading, enjoy your 3 business day settlement periods. This means no shorting, confining a trader to only buy and hold strategies, making them more dependent on luck than a more capable trader. This means it is more expensive to buy stock, since you have to put down 100% of the cash to hold a share, whereas someone with more money puts down less capital to hold the exact same number of shares. This means no covered options strategies or spreads, again limiting the market directions where a trader could earn Under $25,000 in capital In the stock market, the pattern day trader rule applies to retail margin accounts with a balance under $25,000 and this severally limits the kinds of trades you are able to take because of the limit in the number of trades you can take in a given time period. Forget managing a multi-leg option position when the market isn't moving your direction. Under $125,000 in capital Worse margin rules. You excluded portfolio margin from your post, but it is a key part of the answer Over $1,000,000 in capital Participate in private placements, regulation D offerings reserved for accredited investors. These days, as buy and hold investments, these generally have more growth potential than publicly traded offerings. Over $5,000,000 in capital You can easily get the compliance and risk manager to turn the other way on margin rules. This is not conjecture, leverage up to infinity, try not to bankrupt yourself and the trading firm.