Why does the owner of a pizza restaurant make and sell pizza? No matter how delicious the pizza is, it is more profitable to make it and sell it than to eat it alone. The same goes for doctors. No matter how excellent your medical skills are, it is much more beneficial to use them to treat others than to use them alone. The same goes for instructors at goshi academy. No matter how well you know the test subjects, it is much more profitable to teach students while receiving a high salary than to keep it to yourself or take the exam yourself.
However, this is not the case for stock experts, analysts, fund managers, and asset managers. It is much more beneficial for them to keep what they know to themselves rather than revealing it to others. Even if they only maintain a 20-30% annual rate of return, it is only a matter of time before they rise to the ranks of the world’s best investors, and it is not difficult to put their name on the Forbes Rich List if they accurately predict the lows and highs of the stock market a few times.
Of course, it is understandable to some extent that there are experts in fields such as deposit products, bonds, and real estate. Since these products have difficulty achieving high returns in the short term or require a large initial investment, an ‘investment genius’ may briefly pursue a career as an expert, advising others as a hobby, in order to raise seed money. However, I cannot understand why experts exist in fields such as stocks, futures and options, and FX margin trading1.
If they trade on their own during their professional activities, they can earn a huge amount of income that would be burdensome to even take to the bank, and they can start investing in the products with only a small amount of money.
The operators of Internet sites that provide entries for sweepstakes events run their business because providing that service is more profitable than entering the sweepstakes on their own. If providing the service reduces the probability of the asset winning the prize and the resulting loss is greater than the income earned from the business, it is natural to discontinue the service. Likewise, asset managers manage funds because it is more profitable to manage other people’s money and receive fees than to manage their own money directly. If the profits they can make by directly managing their own money are greater than the fund management fees, they should immediately stop managing the fund.
Strange behavior of experts
Why is the operator of an Internet site that claims to predict lottery winning numbers using scientific analysis methods foaming at the mouth because he wants to share the lottery winning numbers with others? Why does a skilled casino dealer work at the casino every day instead of making a fortune from gambling? If you go to a planning real estate agency, they say, ‘If you invest here, making money is like swimming while touching the ground.’ There are many people who invest 100 million and earn more than billions, and they are guaranteed at least 3 to 4 times more. If they know good investment targets so well, they can just get a loan and invest, so why introduce them to others?
If I knew how to see such good land, I wouldn’t open a planning real estate or real estate agent’s office and introduce the land to complete strangers. I will buy all the best land and secretly share the good land only with my acquaintances. Instead of constantly groveling and rubbing their palms like the planning real estate people, they lowered their eyes and showed off their arrogance.
Even if a company that makes an incredibly expensive new drug were to teach you how to make it, you wouldn’t be able to make it right away. This is because manufacturing drugs requires not only expensive facilities but also a large number of highly skilled workers, and enormous capital is needed to build a sales network to sell the products. However, if an ‘investment genius’ teaches you a fantastic investment secret, the secret can be applied with just a computer. If you are extremely poor and don’t have a computer, you can apply by going to a PC room in your neighborhood and paying just a few thousand won per hour. I’ll probably be able to make enough money to take over that PC room in a few days.
However, just as it is difficult for ants and wheels to coexist because they share food, it is also difficult for stock investors to coexist with each other by putting their limited money aside to fight. Will the stock obsessive be able to teach you the secrets of investment? Or can you choose an item that will definitely increase its stock price? Maybe that kind-hearted stock-holding was revived by Sister Teresa. However, from what I know, Sister Teresa was not interested in investing in stocks.
If stock price prediction is possible, why don’t companies concentrate on stock investment?
The Composite Stock Price Index is said to be the most predictive of economic conditions among economic indicators. Therefore, if stock price prediction is truly possible, companies should establish a “comprehensive stock index analysis institute” instead of establishing an economic research institute to conduct economic research to grasp the emerging clouds. If you don’t have doctoral-level people spending all day making economic predictions, you’ll only get poor results, but wouldn’t it be easier to predict stock prices? But why don’t they do that?
During Japan’s bubble period in the 1980s, Japanese companies abandoned their core businesses and borrowed money from banks to invest in stocks and real estate, but they no longer do so. What is the reason? At that time, the rate of return earned from investment was higher than from the main business, but now the rate of return obtained from the main business is higher than from investment. If an “investment genius” actually exists, companies would be better off watching securities TV and thinking about “which securities expert should they entrust their money to” when they are thinking about business strategies.
Why did Warren Buffett collect other people’s money?
Warren Buffett, who is famous for value investing, immediately sought investors after graduating from university, and the investors were fascinated by the explanation of the significance of the welfare effect and decided to invest. Some of them have actually become millionaires now. Did Buffett know about this successful outcome? So why did they seek investors? Value investing is not a method of purchasing stocks on a large scale and then spreading rumors to raise the stock price, but a method of searching for “items that will obviously cause stock prices to rise” and burying the money. Therefore, whether Buffett invests more or less money, it has no effect on his investment results.
Is value investing possible if you don’t have a huge amount of capital? That way people can’t make value investments anyway. However, since people from all over the world claim to be value investors and say, “Warren Buffett started investing with just $100,” it is clear that capital is at least capable of value investing. So why did Buffett attract other people’s money when he could have made more money easily by investing his own personal funds? If you invest by yourself, there will be no one to criticize your investment method, no need to record everything in accounting books, and no one to come and grab you when you fail in your investment. By the way, why did he dare to transfer other people’s money?
- FX Margin Trading: A transaction that seeks profit by simultaneously buying and selling most of the major currencies such as the dollar, yen, and pound. ↩︎