In investing and finance, the words “beat the market” appear from time to time either as part of an investment strategy, conversation, or a combination of both. Investors can often be lured by the phrase in the hopes of achieving returns superior than the market or “above average”.
When we refer to the market, we’re generally referring to a benchmark such as the Dow Jones Industrial Average (The Dow) or the S&P 500.
First off, I’d like to offer a bit of clarity before attempting to answer the titular question. If fact, I’d like to ask two questions and answer both – because they will have different answers, even though they look similar.
First, I think it’s appropriate to ask this question:
Can the market be beaten?
To which I answer, yes. The market can be beat, and there are times where certain investments have done better than the market.
The second question I’d like to ask is found in the title:
Can you beat the market?
To which I answer, likely no, and good luck if you try.
Do you see the similarities in the questions? Both have inferences of outperforming the market, but the second question asks the reader specifically. In other words, the market can be beat, and gets beaten every year. The odds are, you won’t do it.
The reason it’s hard to beat the market is information, or lack of it. Do you have access to the information that billion-dollar firms have access to – and the speed in which they can access it?