[Investing Mindset] - So-Called Market Analysts: Can You Tell Who the Monkeys Are?

[Investing Mindset] So-called market analysts: can you tell who the monkeys are?

Warren Buffett once told a story about so-called [ market analysts ].

There is a wager with 250 million participants.

Every morning, a coin is tossed. Participants guess whether it will land heads or tails. Those who guess wrong give their one dollar, plus the money they won in previous days, to today's winners. If no one wins, all the money belongs to the house.

After ten intense days of betting, 250,000 people have won ten days in a row.

After another ten intense days, only 250 people have won twenty days in a row. Each of these 250 people receives one million U.S. dollars.

These 250 people become the most famous market analysts. Some begin writing books titled [ How to Turn One Dollar Into One Million Dollars in Twenty Days ]. Of course, some go on TV, and some start writing investment columns. (If they bet for another ten days, all 250 experts would lose everything.)

One professor discovered that if you could find 250 million monkeys to participate in this highly intellectual and intense wager, you would also end up with 250 monkeys who could become wealth experts and investing masters. The monkeys could write books and appear on TV for interviews;

they could provide investment advice, analysis, and forecasts.

The so-called market analysts followed by investors are just like these monkey experts.

If you continue listening to this analysis and these forecasts, you are investing based on monkey advice.

No analyst can make investors money over the long run. Do you still believe them?

There are only three kinds of people in the world who can make money over the long run:

1. Warren Buffett and followers of Buffett.

2. People who manage other people's money and charge unreasonable management fees. Investment advisers. Whether clients lose money or not, the investment advisers definitely make money.

3. Hedge fund managers, who charge very high fees. Again, when money is made, they make the most; when money is lost, that is the clients' problem.

Written on: July 13, 2016