In investing and finance, the words “beat the market” appear from time to time either as part of an investment strategy, conversation, or a combination of both. Investors can often be lured by the phrase in the hopes of achieving returns superior than the market or “above average”.
When we refer to the market, we’re generally referring to a benchmark such as the Dow Jones Industrial Average (The Dow) or the S&P 500.
First off, I’d like to offer a bit of clarity before attempting to answer the titular question. If fact, I’d like to ask two questions and answer both – because they will have different answers, even though they look similar.
First, I think it’s appropriate to ask this question:
Can the market be beaten?
To which I answer, yes. The market can be beat, and there are times where certain investments have done better than the market.
The second question I’d like to ask is found in the title:
Can you beat the market?
To which I answer, likely no, and good luck if you try.
Do you see the similarities in the questions? Both have inferences of outperforming the market, but the second question asks the reader specifically. In other words, the market can be beat, and gets beaten every year. The odds are, you won’t do it.
The reason it’s hard to beat the market is information, or lack of it. Do you have access to the information that billion-dollar firms have access to – and the speed in which they can access it?
Do you have the money and time to invest in company analysis, research, and due diligence?
Finally (and maybe most important), do you have the temperament to try to beat the market? By temperament I mean the patience, tolerance, grit,and self-control. These are needed to stay in an investment when it’s getting beat up as well as the wisdom to sell or buy when necessary.
And then there are the costs of trying to beat the market – fees, commissions, etc., all eat into returns. The market doesn’t have to contend with them.
While not impossible, beating the market is a gargantuan battle. And to do so consistently is extremely difficult. Let me also leave you with some proof. Every year S&P releases information on how US equity funds did relative to their benchmark (the market). You can find the report by clicking here.
Sterling Raskie, MSFS, CFP®, ChFC®
The latest in our Owner’s Manual series, A 401(k) Owner’s Manual, was published in January 2020 and is available on 
A Medicare Owner’s Manual, is updated with 2020 facts and figures. This manual is available on 
Social Security for the Suddenly Single can be found on Amazon at 
Sterling’s first book, Lose Weight Save Money, can be 
An IRA Owner’s Manual, 2nd Edition is available for purchase on Amazon. Click the link to choose the 
Jim’s book – A Social Security Owner’s Manual, is now available on Amazon. Click this link for the 
And if you’ve come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed “advisor’s advisor”.
Trying to time the market, it’s not only useless, it just adds stress to one’s life.
Even those firms with the money and resources don’t consistently beat the market. They also don’t know when to get in or out.
Quite true. It’s way harder than it seems…
I certainly agree it is theoretically possible but practically impossible. One of the giant financial advising firms claims to be able to time the market and get you out before a crash. However they totally missed 2008. Riiiiiiight! They missed 100% of the most recent and historic recessions but they are sure to get the next one right. I think I’ll leave mine with the robo’s for now.