It's not impossible to beat the market, but it’s very difficult and rare. Buying and holding an index fund can seem boring, but it can bring financial independence and stability.
But unlike what happens when you give up elsewhere in life, in the investment arena it’s actually a shrewd strategy for winning. Overconfidence, on the other hand, is one of investors’ biggest pitfalls.
I am not the first person to point this out. But what I can contribute to the debate is my extensive performance database that contains real-world returns back to 1980. It compellingly shows how impossibly low your odds are of winning when trying to beat the market. I next repeated this analysis for each of the other nine deciles for initial-year performance rank. As you can see from this chart, their expected ranks in the successive years were very close to the 50th percentile, regardless of their performance in the initial year.
It reminds me of the famous study in which almost all of us indicate we’re better-than-average drivers.
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