The thing about life is that we have this need for personal specialness. We think we are pedestal-worthy and can’t be viewed as average.
The problem is, being average isn’t that bad. It’s life.
Think about it in investment terms. Everyone that’s actively in the financial markets likes to think they can outperform and make brilliant returns.
It’s not about getting the same returns as the market. No, sir, it’s about proving you are better than the stock market in your thinking. After all, the market is an aggregate of the performance of all stocks on that index – some are winners, some are losers (i.e. it reflects an “average”).
And, yes, some people beat the market. Some people even beat the market consistently. But the majority? Not a chance. Not consistently anyway. At best, for the majority, the ability to create a portfolio of perfect investments will, over the long term, drift to be in line with everyone else. Average. And that doesn’t even factor in the costs either.
It might not sound like the most inspiring concept to embrace. I guess it doesn’t chime well with the culture of positive psychology either. But the reason why “average” is not such a bad thing when thinking about investments is that it allows a stock picker to keep an eye on the other key dynamic: Risk.
Time and time again we’ve seen that bull markets breed overconfidence, a fear of missing out and a lack of awareness of your blind spots. We get sucked into believing that we can do no wrong. We don’t control the controllable (in this case our risk exposure) and start to think we’re better than we really are at investing.
When it comes to investing, be happy with being average. It’s actually quite powerful when you think about it. Plus, someone has got to be. Why on earth shouldn’t it be you?