Two lines from hedge fund manager Howard Marks' new memo (which quotes an earlier memo):
"This just in: you can't take the same actions as everyone else and expect to outperform.”
...
"Passive investors, benchmark huggers and herd followers have a high probability of achieving average performance and little risk of falling far short. But in exchange for safety from being much below average, they surrender their chance of being much above average. All investors have to decide whether that’s okay. And, if not, what they’ll do about it."
http://www.oaktreecapital.com/MemoTree/Dare%20to%20Be%20Great%20II.pdfAs an active investor managing institutional money, the way in which Marks attempts to beat the market, which he admits is largely efficient, is by investing in the more inefficient parts of the market (distressed debt and other more illiquid markets rather than large-cap equities generally). But he must take on risk in doing so, and runs a risk of underperformance.
On the other hand, for us as individual investors managing our own money (which will generally be small amounts), the easiest step we can take that will improve our outcomes is not to try to increase our returns, but to:
1. Save more money (The first Mr. Money Mustache thesis);
2. Allocate the money intelligently to a low-cost asset allocation you will stick with (the Bogleheads thesis);
3. Stick with it.
So the way that we dare to be great is, as MMM has said, by beating everyone else in savings and discipline, which is a rather easy task, as compared to beating everyone else in return, which is a very hard task.*
* The task is hard but in contrast to what some may say out of dogma, not impossible, especially for small investors. If you are small, it is actually easier (but NOT easy) to beat the market, because your small size allows you to invest in illiquid markets. But this doesn't mean that everyone can do this on just a few hours a week. Beating the market consistently is very, very hard, and it takes advancing accounting, financial, AND often specialized industry knowledge. I think a good mindset is to be very skeptical of claims of beating the market unless given sufficient evidence otherwise (this is not the same as blanket denials that anyone ever has ever had investment skill, which some on this forum like to make).