– Some of my friends are quick to pull out their phones over lunch to show me the recent quotes of their money making stocks. Their demeanor is in a good mood, happy, they carry themselves with a hint of self-importance.
It’s these days that the market is generally up, most investors are making a bit of money and as such, this provides them with some excitement. They may even quote a financial news alert from 30 minutes ago. They are not investing, these guys are speculating, this is their hobby their fun. They follow the market noise for entertainment. Essentially they are chasing “alpha”. Short term gains in individual stock that is not related to the market. Hugely successful fund managers claim their huge fees are a because of their “alpha seeking” skills for performance.
They equate alpha is just another phone app. To kill some time, have some more fun in the day, if they make money, they share the recommendation after the fact. “I knew this firm was moving. “
It’s a validation and they try to distance themselves from being a “beta seeker.” Beta seekers or “beta grazers” believe more about common sense. They realize the market game is a grand illusion, financial institutions are in the business to make money, so they buy an index fund and own the market portfolio. They then will earn the market return and can sit around like Warren Buffet and relax, maybe watch the hockey game. As the Oracle said, it is simple, but it is not easy.
There are blips here and there but if you want more stress in life, be an active trader and chase all the inefficiencies in the market, highly leverage and just see how well you sleep. As written endless times, most funds and professional investors cannot beat the market index. If there are chronic inefficiencies in the market, these are corrected very quickly, information is disseminated ate the speed of light so while “alpha” is sexy, “beta” is methodical and lets you buy the low-cost market index, is less entertaining over lunch, but you worry a lot less and with less stress you may even live longer.
mildlyirrational 