5. Beating the market

The holy grail of investing is to “beat the market” or to outperform the average investor.  This is typically measured by comparing an investment’s performance against its most relevant index.  If you prefer investing jargon, this is also called “alpha”, which is the excess returns of an investment relative to the returns of a benchmark index.  I made some comparisons like this in previous articles.  Article 3 presented a few facts showing that the vast majority of investment advice out there fails to consistently beat the market over long periods.  Article 4.1 discussed how the average individual investor actually performs substantially worse than relevant benchmark indices.

People routinely assume that they can beat the market, while there are little data actually supporting that.  So why does this keep happening?  I deploy here again in the next three articles the perspective of mindfulness to dissect why people try to beat the market, and why the mindful individual investor generally avoids attempting that feat.  If you were hoping these articles would discuss methods for beating the market, then you can stop reading.

The next three articles are:

  • 5.1 Humility and prideDiscusses our prospects for beating the market based on both mindful philosophy as well as behavioral science.
  • 5.2 Evidence regarding excess returns Presents information regarding the historical reality of attempting to obtain excess returns both by professional investors and us, the individual investor.
  • 5.3 Passive vs. active investing – Provides a few thoughts on the raging debate surrounding the rise of so-called “passive” investing.

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