If you're trading individual securities, you're almost certainly making a mistake. Because most professional managers can't outperform their benchmarks, and there's little reason to think that individuals can.
Interpretation
Investing in individual stocks is generally risky for individuals, as even professionals struggle to beat the market.
This quote by Richard Thaler emphasizes the difficulty that individual investors face when trying to outperform the overall market by selecting individual stocks. It suggests that, despite the allure of personal stock-picking, the statistical evidence shows that even skilled professionals often underperform the market benchmarks, indicating that the chances of success for individual investors using similar strategies are quite low.
In practice
During a finance seminar, a speaker might use this quote to illustrate the challenges of active investing.
The ability of businesses to monitor our behavior is already a fact of life, and it isn't going away. Of course we must protect our privacy rights. But if we're smart, we'll also use the data that is being collected to improve our own lives.
When an economist says the evidence is "mixed," he or she means that theory says one thing and data says the opposite.
In the 1940s, economics started getting highly mathematical. It was basically because economists weren't smart enough to write down models of real behavior that they started writing down models of highly rational behavior - and they kind of forgot about humans.
Academia does not provide many opportunities for immediate gratification. You work for two years on a project, it takes two more years to get it published, and then you start hoping someone might read it.
In the world of traditional economics, it shouldn't matter whether you use an opt-in or opt-out system. So long as the costs of registering as a donor or a nondonor are low, the results should be similar. But many findings of behavioral economics show that tiny disparities in such rules can make a big difference.
My thesis topic was 'The value of a human life.' I asked people a question: 'Suppose you had some risk, a one in a thousand risk of dying - how much would you pay to eliminate it?'
Never, ever invest money that you will need prior to three to five years - minimum.
Your priorities, passions, goals, and fears are shown clearly in the flow of your money.
Investors have few spare tires left. Think of the image of a car on a bumpy road to an uncertain destination that has already used up its spare tire. The cash reserves of people have been eaten up by the recent market volatility.
All the time and effort people devote to picking the right fund, the hot hand, the great manager have, in most cases, led to no advantage.
Specie [gold and silver coin] is the most perfect medium because it will preserve its own level; because, having intrinsic and universal value, it can never die in our hands, and it is the surest resource of reliance in time of war.
The only thing useful banks have invented in 20 years is the ATM.
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