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"Of-course I'm better than the avarage investor"

We are all better than the avarage investors - kind of a paradox - but this is the usual answer one would get posting the question. This answer is very good in many aspects of life since it shows that humans are optemeistic by nature. However in stock trading it only shows that we are overconfident of our abilities.
Unfortuanetly most of us are bad stock traders.
Terrance odean and Brad Barber studied the performance of 66,465 U.S. individual accounts over the course of five years. They divided them into five groups based on frequency of trades. The most hyperactive group averaged 240% annual turnover, the most patient group averaged 2.4% turnover.
They found out that "trading is hazardous to your wealth" - the most active 20% of investors underperformed the least active 20% by ~8% a year (accounting tradng costs) and the only group that generated alpha of about 1% was the patiant group.
The last statement suggestes that individuals with patiance and a "good stock peeking abilities" may indeed generate alpha. I disagree...

i would like to share some of my investing rules:
1. Plan your investment horizon and investment goals
2. Diversify your portfolio
3. Be paitient - trade only when you must.

Sorry no hidden gems here.



Disclosure: No positions