Is there any chance for a layperson to gain from stock exchange?

Question

In this question: Is there a reason why someone shouldn't buy into a temporarily cheap currency of an otherwise solid economy?

One answer said "You're basically making a bet that the market is wrong".

Another answer said "You're betting against the experts that play the game. Why do you think you're better than they are?"

Another answer said "You are not the smartest kid on the block... smart people have looked at things, and using their risk profiles, have determined what they are willing to risk in terms of their investment in the Ruble, compared to other places. If you disagree with them, then invest now in the Ruble, and bet against those people who generally know the systems better than you".

All these answers make perfect sense. But, they seem to be true for any other investment. For example, there may be a stock which seems promising at the current price. But, there are experts who are much smarter than I am, and if they trade the stock at its current price, then they probably know that it doesn't worth so much as I think it is. The same argument is true for bonds, ETFs, real estate... virtually any other investment.

So, suppose I am not an expert, since I have a full-time job which doesn't leave me any time to read detailed financial reports of stocks and other financial stuff - it seems that the only logical conclusion is that I should stay away from investments entirely.

Is this true?

Answer 1

Currencies are a zero-sum game. If you make money, someone else will lose it. Because bank notes sitting in a pile don't create anything useful. But shares in companies are different, because companies actually do useful things and make money, so it's possible for all investors to make money. The best way to benefit is generally to put your money into a low-cost index fund and then forget about it for at least five years.

Answer 2

It depends what you mean by 'gain'. Over long period of times the market increases so using a blind monkey with a dart or index fund should be sufficient to get an average returns. The key difference is that changes in currency are close to zero sum game while money in equity or bonds is actually used for something (building a company etc.).

If you mean 'get above average returns' then you will likely get answers depending on person. If you think that markets are efficient then you won't beat the market consistently - over long periods the returns are likely to be no better then average - because of large number of 'smart people' trying to beat each other (and even them are likely to have below-average returns). If you don't think so then it is possible to get above average consistently - as long as you know how to beat those 'smart people'.

Answer 3

No. As long as you are sensible, an average person can make money on the stock market.

A number of my investments (in Investment trusts) over the last 10 yeas have achieved over 200%.

You're not going to turn $1000 into a million but you can beat cash.

I suggest reading the intelligent investor by Graham - he was Warren Buffet's mentor