From Here to Financial Happiness

Day Sixty Three Unbeatable

Imagine you joined a bunch of weekend warriors facing off against a professional basketball team. Or you found yourself on the other side of the court from a Wimbledon champion. Or you pulled your old bike out of the garage and lined up for the start of the Tour de France. What do you think your chances of success would be? This isn't exactly a tough question: The odds of coming out on top are probably somewhere between zero and nothing.

Investing is no different.

Reams of statistics and undeniable logic have firmly established that investing is a loser's game. The vast majority of investors – both amateurs and professionals – earn results that trail the market averages. It couldn't be otherwise. Before investment costs, we collectively earn the return of the stock and bond markets. After costs, we must inevitably earn less.

Sure, there are always a few winners, just as there's always somebody who wins the lottery. You may even beat the stock market averages this year and perhaps next. But the relentless tyranny of investment costs will eventually take their toll – and your chances of outpacing the market over a lifetime of investing probably aren't much better than your chances of beating a professional tennis player. In fact, the odds may be worse: While a professional tennis player can have a bad day, the stock market is always fiercely competitive.

This is a notion that many folks are reluctant to accept. Our unreliable memories trick us into ...