One of the reasons I believe so strongly in investing for incomes is that I finally accepted my inability to foretell the future.
It's amazing how many new investors go to public places such as Yahoo Answers and ask questions which just seem so crazy and naive.
They Ask Questions That Can't Be Answered Without a Crystal Ball
They want to know when the stock market will reach a bottom or top.
They want to know how to know if a stock will go up.
They want to know what percentage of stocks will be higher in price the next day.
Like there are rules for these things!
They Think the Market is Like Winning at School or on the Job
Maybe the blame lies in school. Students who are smart, work hard and follow the rules succeed. They're graded on a curve, so if they can beat 95% of their classmates they're guaranteed an A. They're taught the same thing on the job. Learn your job and do it well, following the company rules, and you'll get ahead.
So they think the stock market and other financial securities are the same way.
Follow the rules. OK, it takes study and hard work. They've been there, done that, and worn the t-shirt, so now they're ready to apply that to the stock market.
They don't want to realize that all their smarts, good grades, study, hard work and rule-following don't count for anything when it comes to the financial markets.
(OK, if they get a cushy highly paid job on Wall Street, they can do extremely well. But I'm talking about ordinary people who just want to learn how to predict the future of the stock market. What are the rules for that?)
They They Can Find Every Answer Online -- Even Tomorrow's News
When you stop to think about it for even a second, it's amazing that these otherwise smart kids would even begin to think that if somebody knew how to beat the stock market, that they'd give the secret out on a public website.
I also blame the mainstream financial media. They spotlight the mutual fund managers doing well. They tell you the ten stocks to buy now. They give you tips on analyzing balance sheets. They have experts telling you which stocks to buy.
Surely all that means something, doesn't it? If it doesn't, then why are the financial media acting as though it does?
They Think the Financial Media Means Something
The average young person isn't yet hip enough to realize that the mainstream financial media is just spinning noise to their jobs.
The average new investor doesn't realize they're competing with not just their college classmates or team members at work, but with every investor in the world. There's no curve guaranteeing anybody an A for effort. It's not a win-win situation.
And although there are a thousand and one rules about choosing financial investments, none of them predict the future.
If Anybody Does Know How to Beat the Market, They're Not Giving the Secret Away
And if anybody does know the secret to predicting future prices of market securities, they're sure as shooting not giving it away for free on Yahoo Answers just for the joy of scoring 10 points for giving the Best Answer.
No, they're using the secret to make a fortune.
When you were just recently a child assuming Mommy and Daddy and the other adults were in charge of the world, it's disturbing to realize that in reality nobody does control events. OK, some things, but not the course of the financial markets.
It's also a challenge to the best and brightest. When you're smart and used to success, you don't want to admit you're not smart enough to beat the market.
Warren Buffett is a media icon. Nobody tells these kids he succeeds because he buys (mostly) stocks that pay dividends with the intention of holding them forever. He doesn't sell until he's given up on a company.
I Didn't Make This Up - I Wish I Knew How to Predict the Market
You don't have to believe me. Read A RANDOM WALK DOWN WALL STREET by Burton Malkiel, CAPITAL IDEAS by Peter Bernstein and FOOLED BY RANDOMNESS by Nassim Nicholas Taleb.
Then read them again. I think I read A RANDOM WALK DOWN WALL STREET about three or four times before its central message sunk in.
The Stock Market May Not Be Efficient, But It's Unpredictable
If you don't like the efficient market theory, great. I don't either. I call it the unpredictable market concept. I don't care whether it's efficient. I just know it can't be predicted.
So if the market and individual stocks really can't be predicted, that makes buying securities for capital gains gambling, not investing.
Investing is buying financial securities that pay you to own them.
It's investing for incomes.
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