If you’ve ever been tempted to chase the next big thing in the stock market, maybe it was AI, crypto, or the latest news from Spotify, you’re not alone. In a capitalist system where stories of overnight wealth flood our feeds, it’s easy to believe you’re just one smart trade away from beating the market.
But here’s the truth: trying to pick individual stocks or time the market is a dangerous game, and most people get it wrong. In fact, they often lose more than they gain, not because they’re not smart, but because they are playing a loser’s game.
The Spotify Story and What It Doesn’t Tell You
Take Spotify, for example. A recent Bloomberg article highlighted how Spotify’s stock surged in 2023, reflecting investor excitement over cost-cutting and AI-driven efficiency. But that same article pointed out that the benefits haven’t reached major music labels yet, raising questions about whether this growth is sustainable or just a phase of market momentum.
But here’s the problem with acting on that kind of news: by the time that information makes it to the news, it’s too late to trade on it. Markets move on expectations, not headlines. If you think you can react fast enough to beat professional traders armed with algorithms and instantaneous information, think again. Most sectors of the market are very efficient so by the time you hear a piece of news, it’s already too late.
The Myth of the Crystal Ball
We love stories of people who picked Amazon in the ‘90s, Bitcoin when it was $10, or Tesla in the early 2010s. But for every one of those, there are hundreds, if not thousands, of duds that never made it. The winners are obvious in hindsight, but in real time I don’t know who the winners and losers are going to be, and neither does anyone else. People who are trying to get their hands on your money will tell you they know what is going to happen. Anyone who really knows investing knows that here are way too many factors influencing stocks and markets for anyone to know what is going to happen moment to moment. But that’s what capitalism does: it chooses for us. Betting on individual stocks is no different than going to Vegas and putting your money on red. Stocks will go up or down most of the time, and sometimes they will remain flat. Red, black, or green?
Trying to pick a stock that will go up is the wrong way to approach investing. If you pick a stock, I assume you are trying to pick the stock that is going to go up the most over your investment horizon. Now you are relying on luck. If you pick a stock that goes up by 4% but the market index goes up by 10%, your stock went up, but it was still a loser. You missed out on 6% in additional return had you just invested in the market. Statistically, over the short-term, some stocks will outperform the benchmark. Some will outperform by a significant margin, but most will come up short. Separating the winners from the losers beforehand is impossible. If anyone could do that, you would not be able to afford to hire them because they would be insanely rich and likely would not be working for anyone but themselves. The market is absolutely unpredictable in the short-term, but it is remarkably consistent over long periods of time because over long periods it is not about picking winners and losers but rather about betting on capitalism.
Capitalism rewards innovation, adaptability, and consumer value. But it’s brutal, too. Companies rise and fall. Entire industries disappear. Everything will change in the future. There will be new markets, companies, technologies, and trends. Betting big on one name is like putting your life savings on a single horse in a race with a thousands entrants.
What Capitalism Teaches Us About Investing
Capitalism is an unpredictable engine of progress. That’s the very reason you shouldn’t try to time the market or hand-pick stocks; it’s not about intuition, it’s about resilience and participation.
If you believe in capitalism, you should invest in the stock market. If you don’t, you probably shouldn’t. Owning the market is betting on humanity’s long-term ability to solve problems, build things, and create value. But thinking you can pick tomorrow’s Apple or time the next crash, that’s betting on your ability to outguess the collective intelligence of millions of investors. Markets tend to put you back in your place as soon as you start thinking you have it all figured out. Nobody knows what will happen tomorrow. That is why you buy the market and maintain a long-term perspective.
So What Should You Do?
Build a diversified portfolio. Keep costs low. Invest consistently, even when the news looks bleak. When you have extra cash, invest it and leave it invested until you need cash again. Let capitalism do its thing, not by trying to outsmart it, but by participating in it.
Because the truth is: markets don’t reward brilliance. They reward discipline and perseverance. And that’s a bet you can win.
