I’m going to start this article in an unusual way, with two apologies. First off, apologies to all the women who are both bolder and more intelligent than men. I know my wife is bolder than me, but “man up” was just the best turn of phrase to start this post. My second apology to is all the “smart” investors and financial advisers who rightly recommend dollar cost averaging into an S&P 500 index fund. Of course you’re right, and you should stop reading here. Thank you for your attention, now off you go.
If you’re still with me then you’re one of the bold, one of the bad, one of those people who just don’t like to follow the rules. And good for you! You may not beat the market (it’s extremely hard), but that’s not the whole point of picking stocks. The point is to match wits with your peers and see if you win or lose. A lot of winning or losing may be up to pure chance, but some of it does have to do with your intelligence or your preternatural feel for market swings or spotting value.
This post is for you, the one who doesn’t want to follow the heard into ETFs. After all, if everyone buys ETFs, that must create more value opportunities for the rest of us. Think of stocks recently de-listed from the S&P 500. While all those casual investors (who stopped reading after the first paragraph) were forced to sell a de-listed stock (its not part of their ETF after all), we can snap up that security at a bargain price. We can buy when they’re forced to sell.
And if you want to do the even-more impossible and time the market, kudos to you too! It may be nigh impossible, but if you have the right mental model of how the market moves with the economy (see my article To invest well, you need the right mental model of the economy), then you may just well eke out superior returns.
If you lose, or if you fail to beat the market, just remember that it is your work, fellow stock picker, that actually makes the market hard to beat. Without you trying your best to beat the market at its own game, the market wouldn’t be so hard to beat in the first place. So while you may lose, at least you had the courage to try.