Mark D. Goldstein, CFP®
Certified Financial Planner
SAFE-Money Alliance

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Horrible News: There are NO brokers or money managers that can beat the market consistently and by enough of a margin to justify their brokerage fees. Or, if there are a few, they're definitely not going to work for peanuts (any account under $500K is considered "peanuts").

Besides, even if they've knocked it out-of-the-park in the past... that doesn't mean they will continue to do well in the future.

The Law of Averages: If you started out with 256 monkeys in a room and taught them how to flip a coin, the odds are that half of them (128) will get heads on the first flip (by the way, you teach them that the objective is to flip heads by rewarding them with a banana when they do... and PLEASE don't try this at home).

Of those 128 "winning" chimps, 64 will flip heads the next go-round, as well. And 32 will flip heads three times in a row... 16 head-flippers four times in a row... 8 will succeed five times in a row... 4 will flip heads an amazing six consecutive times... 2 will achieve an incredible seven straight successes... and ONE (out of the original 256 total monkeys) will flip heads EIGHT times in a row!!!

Genius? Talent?


The fact is, the one remaining ape is no more or less likely than any other monkey in the room to flip heads the ninth time. It's chances are, as always, just 50/50. He is simply a statistic in a probability formula.

So, my point is that, in any given year, half the stock market "players" will beat the averages and half will do worse. And after eight years, approximately one random player out of every 256... be it a broker, mutual fund manager, private investor, bank trust department, etc.,... is likely to have done better than average every single year (even though more than one will undoubtedly claim they did)!

And that player, of course, will attract tons of attention and develop a huge following.


Conclusion: I won't go so far as to say that the stock market is 100% luck. However, it's enough of a crap-shoot that luck has a great deal more to do with it than any professional money manager is willing to admit.