December 9, 2020 – Right at the start, let me point out that, no, I’ve not gone to the bad side! I will not try to sell any actively-managed funds here. If you’re a part of the passive investing crowd, which is a large portion of the FIRE community, you might find the title a bit “clickbaity.” Because the thought process of the average passive investor would go like this:
- Underperforming the VTSAX is a non-starter. That’s highly undesirable. The only assets we’d ever consider are those with an expected return equal to or larger than the VTSAX!
- But the problem is that nobody can beat the market due to efficient markets!
- If we intersect the two sets above, i.e., constrain ourselves to what’s both desirable and feasible, we’re left with the VTSAX (or whatever close substitute you might pick, e.g., FSKAX from Fidelity).

That line of reasoning has some advantages: it has probably convinced a lot of folks to get rid of their irrational fear of the stock market and many have benefited from low-cost index investing instead of wasting money on actively-managed funds. My concern here is that I think that this thought process of “nobody can beat the market” is overly simplistic and (literally) one-dimensional. Of course, there are ways to beat the market! Here are eight ideas I can think of… Continue reading “How to Beat the Stock Market”