> Do you believe that investment is entirely random and there is absolutely no skill involved?
The skill involved is more just "best practices" that let you match the market: Buy-and-hold, diversify, basically, do what the index funds do and you will be roughly +0 to the market. Beyond that, it's a totally random distribution that adds between -X and +X which allows some participants to beat the market and causes some to underperform. You can't tell beforehand which participants will beat the market, even having full knowledge of their strategies and skill. If you think you can, please tell me which active funds will beat the market in the next 10 years based on their skills. I'll invest in them.
> You can't tell beforehand which participants will beat the market, even having full knowledge of their strategies and skill
I never implied that I can. That fact doesn't prove that it's somehow fundamentally impossible to do that. The problem is that it's impossible to tell if you "strategy" is working until a significant amount of time passes and by that point the markets conditions might have changed to such an extent that you don't longer have an edge (add to that the fact that it's hardly possible to determine what part of your success was luck/skill). So there is always a huge amount of uncertainty.
Albeit if we look back by ~10-15 years it's rather obvious that it was possible to beat the market by a very significant e.g. there were clear rational reasons to believe that Nvidia would do better than its competitors like AMD or Intel and that there would be significant growth in GPU compute/ML/AI (of course accurately estimating the extent and exact timing but that wasn't necessary at all to get above market return) same applies to many companies in adjacent and unrelated sectors. Was I or the overwhelming majority of investors capable of realizing that and more importantly acting on it? Certainly not. But looking back it obviously wasn't random.
The efficient-market hypothesis is clearly false, at least in the short to medium term. That in no way means that most investors are even remotely capable of utilizing this fact.
It must have been nice in the early 2010s to be so smart to predict AI would be a huge hit (after a couple previous AI winters) and that GPUs would be the key and that NVIDIA specifically would reap the benefits. But I'm sure you're smarter than me and a lot of other people. And AMD also did pretty well during much of that same period although I sadly sold my modest holdings after they went nowhere for years after spiking with some adoption by the big server makers. It would probably have made more sense to bet on Intel during that period.
Exactly. The point is that the only way you can know that a particular "strategy" was market-beating is by looking back after the fact. Just like you can only know who is a good coin flipper after running 10 trials and looking back at who flipped heads 10 times. And the strategies will be similarly repeatable.
The skill involved is more just "best practices" that let you match the market: Buy-and-hold, diversify, basically, do what the index funds do and you will be roughly +0 to the market. Beyond that, it's a totally random distribution that adds between -X and +X which allows some participants to beat the market and causes some to underperform. You can't tell beforehand which participants will beat the market, even having full knowledge of their strategies and skill. If you think you can, please tell me which active funds will beat the market in the next 10 years based on their skills. I'll invest in them.