The perils of getting ahead of yourself and losing control.
What do I mean, beating the market isn't everything? Isn't that the Holy Grail of every investor? Isn't every single one of us out to do exactly that, beat the benchmark and thrash the market in order to get rich?
And we think we can do it, don't we? Because we're better than the others. We have our strategies, we have our talents, we have our moments of inspiration.
Those greed-addled, short-termist number-crunchers in the City, they can barely add up. Those automated algorithmic high-frequency trading machines, they haven't got a brain between them. The small army of ant-like private investors. Fools, the lot of them!
That's what we tell ourselves, at least at first. We all kid ourselves that we can beat the market. And even when we don't, the self-belief survives: "There'll always be next time…"
We can't all beat the market, you'll admit that. You understand the law of averages. But here's something you may be less willing to admit: there are plenty of people out there who are much brighter and better equipped than you.
And even they don't beat the market.
So why makes you think you can?
... and golden girls
Sorry to bang on, but I would rather destroy your ego than watch you destroy your wealth. Because that's where your vainglorious attempt to beat the market is likely to end up.
Your battle to prove yourself top dog is likely to lead you down some very whiffy alleyways. It happened to me, years ago, when I thought a very clever way of diversifying from Aberdeen Technology was to buy Aberdeen European Technology.
Or, more recently, when I piled into Vatukoula Gold Mines (LSE: VGM). I thought I was being clever, noting that gold mining stocks were trailing the gold price, and this might be a clever way of catching the gold bug.
All I caught was a cold.
A good beating
Because that's how people try to beat the market, isn't it? At least in the short term. By leaping into molten sectors. By whizzy stock selection. Through spotting opportunities nobody else can see (the blind fools)!
Or by putting their faith in last year's hottest fund managers in the hope that they can wow the catwalks again.
You will get it right, sometimes. I've had my moments, and I bet you have as well. But you're unlikely to do it again, and again, and again. Overall, you are likely to end up getting beaten up by the stock market instead.
Keep your eyes on the road
It's not just me thinking this. Foolish favourite low-cost tracker manager Vanguard Asset Management has been having similar thoughts.
It says investors should forget beating the market, and focus on things they can control. They should avoid getting distracted by hot themes and passing fads, especially at this time of year, in the dog days of the ISA season.
They should also shut out all those investment experts and their fallible forecasts.
So what can you control?
Vanguard says you can control your exposure to risk, by appreciating the joys of asset allocation, constructing a portfolio that matches your investment objectives and attitude to risk.
You can also control the make-up of your portfolio, through diversification. That means getting a decent spread of UK and global equities, through stocks or trackers, and balancing them with bonds, cash and property.
You can control your tax exposure, by using your full ISA allowance.
And, finally, you can control your investment costs, because every penny you pay in charges comes directly out of your investment returns.
A modest proposal
Now that doesn't sound like a recipe for beating the market. Nor does it sound like a platform for your special talents, your unique investment abilities, your genius.
But it should still help you beat most other investors. They're the ones falling off last year's bandwagon and running up hefty trading charges by churning their portfolio.
In the long run, it could still make you rich. If you're patient.
So, tough guy...
Maybe I've underestimated you. Perhaps you are that investment God after all. In which case, please, don't let me stop you. Go out there and beat the market.
Show us what you're made of. You can do it.
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