Replies to post #33842 on A.I.M. Users Bulletin Board (AIMUSERS)

[ls7550]

There are many analysts each studying individual shares working 70 hours a week doing so looking for a 0.1% edge (50.1 : 49.9). Using derivatives even such a small edge would if consistently achieved end up with the whole stock market being owned by an investor with such an edge within a decade or less. To the extent that some traders pay top dollars to have their computers as close to the market as possible in order to gain nano-second advantages.

Risk-free investments (if there is such a thing), generally provide an inflation (purchase power retention) reward. In order to grow wealth investors diversify into more riskier investments, perhaps investing (risking) $100K in the hope of achieving a 4% real (above inflation) average reward. Stocks generally fall into that riskier category of risking a lot to gain a little. If instead of risking everything on a single stock you diversify across many stocks, then generally the gains outweigh the losses i.e. its asset allocation and money management that reduces the risks. What you buy someone else sells, what you sell someone else buys. Generally when it seems like you might be buying something cheaply it may be that the seller is happy to take a small loss on in order to insure against a potential lager loss and you're in effect taking on that large loss/small gain risk/reward. The best business' are in private ownership. The stock market is full of the others where public investors in effect provide insurance against large losses in return for a small insurance premium being paid/received.

Yes I do think yields +/- in a coin flip like manner. But rather than being like a simple single coin-flip emulation, with stocks its more like having two coins. One that is flipped at regular short intervals and adjusts prices up or down by small amounts in quick succession, and the other coin that flips at random intervals, sometimes with long periods between each such flip - sometimes in quick succession, and that adjust prices up or down by much larger amounts.