The Mental Mistakes That Active Investors Make

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Why is it that amateur investors still believe they can beat the market when all the evidence suggests they can’t? It has to do with how our minds work.

In the battle between passive and active investing, there’s no question: Passive has been the clear winner. For years, the flow of new assets has gone more to low-cost, widely diversified index mutual funds and exchange-traded funds, rather than to actively managed funds.

It makes sense. There is much evidence that passive investors, who are content to match the market, earn higher returns than active amateur investors, who strive to beat the market.

 

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Nobody practicing against a wall thinks they are good. The wall always wins.

no need to analyze anything. Just buy everything every day at any price.

Dunning Kruger effect

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