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Why You Can’t Win At Poker Or Beat The Stock Market By Picking Stocks Or Timing Stocks - These Are invalid Beginner Investment Strategies

Posted on the June 24th, 2009 under Beginner Investor, Beginning Investment Strategy, Dan Solin Investment For Beginners by Jeff the late investor

Here is Dan Solin’s brilliant explanation of how dangerous timing the market is (without inside trading, which I imagine takes a lot of the guesswork out of stock-picking to beat the market - unfortunately, the government frowns upon this, so I hear):

The odds of flipping a coin and getting a head is obviously 1 out of 2. The odds of getting four heads in a row is 1 out of 16. If you flipped three times and got three heads, what are the odds of getting a fourth head? The answer is still 1 out of 2. Past performance of the coin toss does not affect future probability.

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This is a brilliant quote. It’s logical, inarguable, and best of all, provable. Look, you can write up a list of the things that may affect the outcome of a toin coss. In fact you could come up with an almost inexhaustible list - but still, you will never predict the outcome with any kind of accuracy. This is truth! Actuarial and statistical tables cannot determine the outcome for an individual - so why would you think any number of factors, modifiers, and further bits of information could allow you to ‘beat the odds’ at picking stocks. This is my argument with playing poker for a living - no matter how much you work to defeat the random factors in the game, they are never eliminated - therefore loss is inevitable.