The sad truth when it comes to investing is that the bottom 50 percent of the people will be in the bottom 50 percent of performance. There is just no way for a large number of people to beat the market. The market is just too efficient in pricing stocks. However, luckily, when you take the full investment community, you can be the smarter stock picker. Most of these clients are forced to be in the market at all times and are forced to invest diversified portfolios using techniques such as sector rotation based on the sectors they feel are most attractive. This just doesn't work over the long run and you cannot repeatedly earn above average returns.
If you want to be part of the select few that earn above average returns you have to pick your spots. You need to bet heavily on your best ideas. Think about sports betting. Do you know any sports gamblers that make a lot of money by betting sports every day. Most likely you don't as there are only a minuscule amount of individuals capable of doing that. If you want to have any kind of success in sports betting you probably should pick one or two games out of the year where you think the betting public just simply has the odds wrong. That alone still doesn't guarantee that you win because of the importance luck plays in the sports world.
In the world of stocks, luck plays less of a role. As the successful companies are generally successful with or without luck. They invest wisely and have key products with amazing pricing power.
Therefore, in order to beat the market you have to pick stock selectively and run a concentrated portfolio. On top of that, it is essential, that of the select few stocks you pick, those stocks have to be great stocks. Naturally, if you are being selective, those stocks should inhibit characteristics that illustrate their appeal. So I would strongly argue that running a concentrated portfolio where you pick stocks does not guarantee you success. In fact, it could leave you in a rough situation. The key is that of the stocks you pick that they are great stocks. So going back to my previous postings, it is essential that the stocks you pick are undervalued and are mispriced.
The stock market is the greatest wealth builder the world has ever seen. My advice to you is if you want to have success in your endeavor of building and preserving wealth that you either simply buy an index fund or that you take my advice and run a concentrated portfolio full of stocks that are fundamentally undervalued by the market. The latter of the two is the one that will give y0u the ability to truly earn outsized returns in the market.
