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Why shouldn't newbies do T easily?

In his book "Master of Trading", Laszlo Bilini did a backtest statistic: If an investor put $1 into the Dow Jones Index Fund in 1900, it would appreciate to $290 by the beginning of 2013. If the investor also holds it for a long time, but happens to miss the best five trading days of the year, then by the beginning of 2013, his account will have less than 1 cent left.

Dalba Research provides another set of data. In the past 20 years or so, the annual return rate of the US stock market has been about 10%, but the average annual return rate of US mutual fund investors is only 4%, and stock traders can't even reach 4%.

There is a very important reason for this. People always try to improve their investment returns through their own active operations. Or they don't do it intentionally, but passively. After all, when you hear everyone bragging about how much money they have made in the market when you have a meal with relatives and friends, you may be unable to resist imitating and buying hot stocks.

The above is supported by data. According to statistics, in 2021, the year of the bull market in the U.S. stock market, more funds flowed into the U.S. stock market this year than in the previous 19 years combined. The result is obvious. A large part of these stupid money will be forced to admit defeat and exit in the next deep rebound in 2022.

Short-term traders are most fond of short-term exaggerated returns, but statistics from human investment history have told us that, based on a time scale of several decades, the ceiling of people's investment ability is an annualized increase of 20% in full positions. If the time is extended to 60 years, only one person in the world can achieve this achievement. Even this person has underperformed the S&P 500 index fund in his investment career over the past 24 years. His name is Warren Buffett.

If it is changed to a pie circle, the situation is actually similar. In the long run, very few people can outperform the firm holders of the pie in terms of returns. So is there any way to outperform the pie holders on the premise of thinking about safety? Of course there are, and we will talk about this topic later when we have time.