“Investing is hard. Don’t let anyone tell you otherwise.” – Me back in 2006
What’s funny is why would anyone who actually spending time in around the markets would say it IS easy. Two posts today just reminded of this idea. First, Charlie Bilello at Pension Partners takes apart the commentariat on its continued use of the phrase “The easy money has been made.” His point being that it implies there was ever a time when there was ‘easy money’ to be made in the markets. Bilello writes:
Will the markets become harder to navigate in the years to come? I don’t know, but it seems like a reasonable assumption to make given the record-low volatility and unusually low drawdowns we have experienced of late. But getting harder tomorrow doesn’t imply that it’s easy today. There’s no such thing as easy in investing.
Second, in a recent post at the Mathematical Investor they took to task the idea that simple technical analysis techniques could compete with mathematically-inclined investors with “overwhelming firepower.” They write:
The same is true today: there is no royal road to investment — there is no simple, easy-to-understand scheme, whether it be charting, technical analysis, wave analysis, or anything else, that can consistently achieve above-market-index results. For individual investors especially, nothing can take the place of patient, long-term, diversified, low-fee investment.
The bigger problem for investors may be that the challenge of investing is only likely to get more difficult. Michael Mauboussin in his book and elsewhere has discussed the idea of the ‘paradox of skill.’ Mauboussin describes it:
In investing, as in many other activities, the skill of investors is improving on an absolute basis but shrinking on a relative basis. As a consequence, the variance of excess returns has declined over time and luck has become more important than ever…This process is called the paradox of skill.
Above all, Mauboussin says investors need to play “attractive games” where they are not the obvious patsy. This is easier said than done. For investors who don’t want to play the active investment game there are plenty of options. For those who choose to continue to play, remember that investing wasn’t ever easy and likely won’t be getting easier any time soon.