If you are an ordinary citizen, investing in the stock market is just plain stupid. Why?

  1. You lose money to the broker for fees on every transaction.
  2. The stock market is essentially a sophisticated gambling game where the players attempt to take each others’ money. You are a rookie. The old timers will rob you blind. You have not the first clue how the dirty tricks they use work. You are a lamb about to be sheared.
  3. To make money, you must buy a stock that is strongly undervalued. Rookies have no way of knowing which stocks those are.
  4. You have to buy low and sell high. Rookies don’t have the emotional discipline. They can’t help but do the opposite, selling when their stocks crash and buying stocks that are shooting up.
  5. As a newbie, you can’t help but be a lemming, constantly following the herd, being sucked in by rumours. That strategy is guaranteed to fail. The stock market is a game designed to take money from the many and concentrate it and give it to the cleverest few investors. Herds stampede, creating phony price bubbles. If you follow them, you will be punished too.
  6. To succeed, you must be able to predict the future prices of stocks better than most other investors. You have no edge to do that.
  7. You have not the first clue about the mathematics of the stock market or the ability to program computers to aid you in your trading decisions the way your competitors have.
  8. Monkeys throwing darts to select stocks do better than most investors because they are not sucked in by rumours, they don’t feel pressured to do what everyone else is doing (a guaranteed fail strategy), because they fully diversify and because they don’t pay fees to frantically keep changing their minds.

The one exception I would make is if you invest in a company whose product you believe in where you have personally known the principals for a long time, and you believe, based on personal knowledge, the company will succeed. You are investing partly for return and partly to support the company’s goals. There you do have an edge over other investors.

~ Roedy (born: 1948-02-04 age: 64)