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Author Topic: The #1 Reason You Must Be Better Than Average  (Read 1869 times)
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tamo42
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« on: 2011 May 31, 10:09:21 am »

Is that the deck is stacked against you. 

Over the past few days there has been a flurry of articles and blog posts about a recent study that examined the stock market returns of US Representatives. It turns out that the representatives outperform the market average by about 6% per year. This is a tremendous margin. 

The common inference taken away from this is that the reps take advantage of the information gained through regulation and oversight of industry to fatten their wallets. 

There was a similar study a few years ago about senators, and they did even better than the reps. 

Of course, all of this is legal. What would you expect when the congress makes the laws in the first place?

I don't want to blather on about how this unethical, unfair, and should be illegal. We all can see that very plainly, and it would detract from my principal investing principle: see reality as it is. 

I use this example of unethical behavior simply to highlight the fact that the deck is indeed stacked against you. Besides riff raff like congressmen trading against you, there is also inflation, taxes, trading fees, frontrunners, and the list goes on and on. You simply cannot be average with your money. 

Whatever you choose to do with your money, you must become an expert. 

If you are in the stock market, learn about big trends and little trends. Learn about fundamental and technical analysis. Learn about options and futures. Learn about momentum and volume. 

If you are in real estate, learn the different ways of buying and selling. Learn the good streets and the bad streets. Learn about capitalization rates. Learn about triple net leases and ground rents. 

Even if you are in the Chinese coin market, which badon has done such an excellent job of elucidating, you must learn the market. You must learn the terminology, what is overvalued (even if you agree with badon that the answer is nothing), what is undervalued, what sectors are in rotation, etc. 

In short, if you are average, you will lose in the worldwide game that is investment. I am constantly astounded at the lack of care people put into their investments. "I got a hot tip," or, "This was recommended," are key phrases that demonstrate the "investor" is treating his investment like an impulse buy to pick up a snickers bar in the checkout line at the supermarket. How people treat thousands of dollars this way is beyond me. 

I know, it's hard and there is limited time available. But the good news is that this is the information age. Getting information is faster and easier than ever before. You can become an expert in anything in just a few weeks (the years of practice are something else). 

So you have a choice: take the time and effort to become an expert in whatever area you want your money to work for you or let everyone else in the investment world take your money. It really is that simple.

What is your decision?
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badon
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« Reply #1 on: 2011 May 31, 10:55:44 am »

Another great article. It is insightful, and to the point. Anybody can understand this, because the single bare fact is quite simple: average is for losers. I had a conversation about this exact topic with someone yesterday, who insisted that average is easier and thus better. No lie. I could not believe what I was hearing. This person is intelligent and hard working enough to be much more than average, but it's easier to just be average.

They say it's lonely at the top. The people that know me in real life think I'm strange, "intense", or something else along those lines. Most of them have no idea how being different is so similar to being better. No one has any idea how positively that has affected my financial success.

Being different gave me an edge over everyone else, that eventually translated into comparatively large amounts of wealth. It allowed me to think about what it will take for me to be better than average. To my surprise, it was not more work, because everyone is already working too much. It was not more debt, and stuff.

Without revealing too much personal info: I work below average amounts, earn below average amounts, ponder my investments far above average amounts, and have built assets far above average amounts. Below average, above average - it doesn't matter, as long as it's not average.

I know many people who are doing the easy, average thing. They work, go to school, buy stuff, and accumulate debt. They're killing themselves trying to be average, and they're going nowhere.

This is one of the most entertaining cold-hard-truth things I've read in a long time:

http://bluntmonkey.wordpress.com/2011/02/22/dear-single-people-of-los-angeles-youre-not-all-8s/

It's kind of long, you don't need to read it all. My interpretation of it is that average is much lower than average people think it is. In other words, you have to stand out. Lady Gaga knows that - If you can't be ridiculously beautiful, then you have to be ridiculously hideous Smiley Either way, it can work to your benefit if you make the most of what you have, without reaching beyond your grasp by trying to be like people who are not you.

I didn't come from a rich family, I didn't have good beginnings, and I had pretty much every disadvantage imaginable. I was able to twist it all to my advantage just by not trying to be like everyone else, who had better families, better beginnings, and no disadvantages - I had to figure out how to not be average, and still get ahead. Step one was to not care what anyone else assumed about me.

The hardest part is getting through the first 5 years. After that, it gets easier. I haven't forgotten how hard it was to get here, but now that I'm here (wealthier), it feels pretty good. I appreciate what I've earned, because I earned it hard, and I still don't care if people think I'm below average. If that's where I have to go to be better than average, then so be it Smiley
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« Reply #2 on: 2011 May 31, 11:57:17 am »

If everyone becomes above average, then everyone is average.  I tried to stand out by being ridiculously average, so others can be ridiculously above average.  So you guys should really thank me to remain average.

So, what the hot tip for today's market?
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tamo42
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« Reply #3 on: 2011 May 31, 12:02:03 pm »

Lol, you're right, average depends in everyone else involved. Fortunately, the bar is pretty low.

Additionally, it isn't necessary to be better than average in everything. You just have to better than average at whatever it is you choose to focus on. It is certainly possible for everyone to be above average in their own particular interests as not all participants are really focusing.

So, I come back to the point that it isn't that hard to be better than average. You just have to choose to be so and put in the effort required.
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Neal McSpadden
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« Reply #4 on: 2011 May 31, 12:03:24 pm »

Thanks for a good article, and thank yo badon for sharing your view. I also find the appearance of being average can give a great advantage (i.e. being under-estimated). That is what i was told by above-average people Tongue
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badon
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« Reply #5 on: 2011 May 31, 12:04:07 pm »

Stop acting rich and start living like a real millionaire
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If families are a problem for the system, then we must reject the system, not the families.
Founder of the Coin Compendium (forum, blogs, calendar, images, donate, contribute).
LBC makes you rich, with a free ebay gift certificate awarded every month!
The Coin Compendium and the china-mint.info forum, censure, disclosure.
Do not PM questions. Answers should be publicly available.
Backup is not enough. Protect your data with MultiPar.
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About me: User:Badon - MediaWiki.org
Badon effect: type 1 to 8, type 9.
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Use my work. Give credit.
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tamo42
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« Reply #6 on: 2011 May 31, 12:27:43 pm »

I actually have a copy of that book if anyone wants to buy it. $17 shipped, and I take paypal.
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Neal McSpadden
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« Reply #7 on: 2011 May 31, 01:18:11 pm »

Is that book like the Millionaire Next Door book?  The main point of that book just seemed to be "live frugally".  Buy cars used instead of new, cut coupons, etc.
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« Reply #8 on: 2011 May 31, 01:20:50 pm »

The book is by the same author, and yes, the main point is to live frugally. And no, I am not the author Smiley
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If families are a problem for the system, then we must reject the system, not the families.
Founder of the Coin Compendium (forum, blogs, calendar, images, donate, contribute).
LBC makes you rich, with a free ebay gift certificate awarded every month!
The Coin Compendium and the china-mint.info forum, censure, disclosure.
Do not PM questions. Answers should be publicly available.
Backup is not enough. Protect your data with MultiPar.
Writer of LBC Chinese coin investment articles (list).
About me: User:Badon - MediaWiki.org
Badon effect: type 1 to 8, type 9.
I type faster on a TypeMatrix.
Use my work. Give credit.
Coin, medal, whatever!
Coin storage advice.
FreeArc is amazing.
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tamo42
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« Reply #9 on: 2011 May 31, 01:25:35 pm »

The book goes into really exhaustive detail about the difference between what actual rich people do vs what poor people think rich people do. And yes, the take home message is live frugally, invest the difference in your best area.
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Neal McSpadden
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