
3.1 Knowledge and the learning curve
If you take a random walk down Wall Street, you’ll soon discover that the
average amateur investor doesn’t know what he’s doing. To make money in
the stock market, everyone knows you must buy low and sell high. Yet year
after year, the wolves fleece the lambs out of millions of dollars. It’s well docu
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mented that the little guys—meaning you and I—are usually wrong at critical
turning points in the market.
Many institutional investors don’t do much better either. Most pension
fund managers, mutual fund portfolio managers, and professional money
managers have displayed an uncanny inability to beat the market consistently ...