I've watched all of the videos on Ben Felix's channel and generally share his worldview. But I've been having some doubts about market efficiency and active investing being extremely hard.
There were 4 moments when I thought - I should buy this stock for some reason, e.g. after ChatGPT I thought about buying NVidia. But I decided to continue being a purely passive investor. Now I regret that decision because all of those stocks overperformed.
I also correctly guessed that 3 out of 4 stocks would underperform (TSLA was the wrong call). It seemed obvious that the market was dumb about GME, AMC and TLRY.
Sure, many active investors are extremely sophisticated but what if the average invested dollar is kind of stupid?
Also, one minor nitpick about Ben Felix's content is focus on historical statistics. I think this gives you a false sense of confidence and security.
efficient markets will be a myth for as long as retail investors are allowed to trade stocks.
The stocks you are looking at are all stocks that have been popular with retail investors, and retail, as a general force, isn't out there doing equity research, incorporating all available information, estimating risk, and allocating its portfolio along the efficient frontier. Retail investors move the market, and there is money to be made if you can quantify how much of that move is driven by short-term sentiment.
That said, the market can remain irrational longer than you can remain solvent, sometimes "irrational" positive sentiment is coincidentally well-placed, and irrational sentiment is contagious and difficult to see through sometimes. Because of these factors, IMO any kind of active investing strategy should come with some kind of risk management component, where if your active bets blow up, you don't lose your life savings. Personally, I keep active bets to <20% of my portfolio, I'm extremely careful with leverage (margin, options, futures), and I put stop-losses on any particularly volatile position and any that incorporates leverage. I want to have it so if I'm dead wrong and also I fall into a coma and can't unwind my trade, my position still can't screw me.
There were 4 moments when I thought - I should buy this stock for some reason, e.g. after ChatGPT I thought about buying NVidia. But I decided to continue being a purely passive investor. Now I regret that decision because all of those stocks overperformed.
I also correctly guessed that 3 out of 4 stocks would underperform (TSLA was the wrong call). It seemed obvious that the market was dumb about GME, AMC and TLRY.
Sure, many active investors are extremely sophisticated but what if the average invested dollar is kind of stupid?
Also, one minor nitpick about Ben Felix's content is focus on historical statistics. I think this gives you a false sense of confidence and security.