Warren Buffet explains why you can't beat the market
boingboing.net
boingboing.net
The article's title is misleading. Buffett's memo explains that you can't beat the market averages, but not why. I have no doubt that Buffett is right -- that a conservative, buy and hold position in an index fund is the most effective way to make money in equities -- but his memo doesn't go into detail about why this is true.
The why is easy to state -- if a method existed that reliably improved on market average returns, either:
A. It wouldn't remain secret for long, then everyone would practice it, and that would become the new market average performance, available to everyone.
B. It would remain secret in perpetuity, the lucky secret-holders would drain the market of its capital and its attractiveness to average investors, and businesses, smelling a rat, would refuse to raise capital using equities. The market would collapse.
Therefore there are no "secrets of the winners", those much-touted investment books are worthless, and the most boring, geriatric kind of investment, like an index fund, is the most efficient way to grow your money.