Investors Trying to Beat the System Invariably Are Disappointed

Let’s start with a parable.

Next to a mountain trail stood a twisted, gnarly tree. Hikers loved the shade it provided, but one day, a guy with an ax came along and decided the tree could do more than provide shade. He thought the tree would make a great table. So he chopped it down and hauled the tree to a carpenter.

Much to the man’s disappointment, the carpenter took one look at the tree and said, “This tree is too twisted and gnarly to be a table.” Now the hikers have no shade, the tree isn’t a table and the man with the ax is disappointed.

Investors make a similar mistake every time they try to make stocks feel safe like bonds or try to get bonds to generate big returns like stocks. Stocks, bonds and even cash are what they are. That doesn’t stop us from trying to change their nature though. More often than not, we end up disappointed because they fail to meet our expectations.

But is it really their fault? Or is it ours?

Read the rest of the article at The New York Times.

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