Below is an excerpt from Dave Portnoy.
Many people share these opinions. That’s the kind of thing that infuriates people.
The market is rigged!
It’s a huge casino where the house always wins!
This story is accompanied by the following story.
Investors who jumped into the recent online frenzy for the troubled video game retailer’s stock were in a mania, according to an Investors Business Daily analysis of S&P Global Market Intelligence and MarketSurge data. The stock lost $13.1 billion in just three days from its peak. Losses from the May 14 high now far exceed GameStop’s (GME) total of $6.8 billion.
I’m not sure that measuring the loss in market cap since the peak of the meme stock mania is the right way to think about gains and losses. But some people use stories like this as evidence that the stock market is rigged against the little guy.
For people who want to get rich overnight, the stock market can feel like a casino where the house always wins.stock market teeth If you are looking for easy money, cheat against you
Super rich people have more brains, more computing power, and better information than you. And it remains difficult for many of them to beat the market.
Sure, there are one-time lottery tickets, but the stock market is for patient people.
When I was in junior high school, we had an assembly about once a month in the gymnasium.
Strong men who could tear a telephone directory in half. Someone from the DARE program. If you’re lucky, you might even see musicians perform.
One day, a man came up to me to shoot free throws and gave me some motivational advice. This guy looked less like a basketball player and more like a middle-aged dad in 1990s Nike warm-up pants and a polo shirt.
But while we all sat cross-legged around the three-point line and baseline watching, he stepped up to the line and knocked down free throw after free throw.
He shot hundreds of free throws while delivering a well-thought-out speech about the benefits of practice and process. He didn’t miss a single one. Not even close.
The form was exactly the same each time. Same setup. Same release point. Same follow through. It was impressive that he never deviated from the process.
The same theory applies to the stock market.
If you don’t deviate in the short term, you will definitely get better results in the long term.
This is the historical winning percentage of the S&P 500 over various holding periods since 1950.
If the stock market were a casino, it would be the only casino in the world where the longer you play the game, the more likely you are to succeed.
The daily stock market is only slightly better than a coin toss in terms of profits and losses. Historically, the longer the time period, the more likely you are to make a profit.
If you try to outperform the stock market in the short term, the stock market will feel rigged.
Ironically, with index funds, ETFs, target date funds, tax-deferred retirement accounts, zero-dollar trading fees, automated investing, and access to more information than ever before, there has never been a better time to be a retail investor.
In many ways, individuals have an advantage on Wall Street.
There are no benchmarks to exceed, no committees or donors to satisfy, and you don’t have to answer to outside investors on meaningless short-term performance numbers.
The market is rigged in favor of this little guy versus Wall Street in the long run. They are forced to play the short game.
The only foolish money is the investor who thinks that money will come easily in the short term.
Making money is not easy. The stock market is difficult.
But it works for patient investors with a long enough time horizon.
References:
The stock market is not a casino
