The stock market will make you rich?

By Cullen Riche, MarketWatch

Most market participants tend to think of their financial situation in nominal terms. But when you are looking at your portfolio performance it’s imperative to think in real terms. View your portfolio performance by the return that goes into your pocket. That means backing out inflation, taxes, fees and other frictions that reduce nominal return.

The stock market is not what makes us rich. The people on the Forbes 400 list didn’t get wealthy flipping stocks in their brokerage accounts. They got wealthy building and running fantastic companies. The stock market can protect your wealth and help you maintain purchasing power, but it’s not the place where most of us are likely to make our fortunes.

It’s hard to avoid the allure of trying to beat the market — to outperform on a consistent basis by simply picking stocks. In truth, most of us are not going to strike it rich in the stock market and most of us shouldn’t even try.

You don’t need to beat the market. Attempting to beat the market means taking risks that are probably not appropriate. Instead, you need to allocate assets in a manner consistent with your financial goals of beating inflation, without exposing your portfolio to disruptive levels of risk. Beating the market is probably not only unattainable for most, but likely to encounter disastrous financial turbulence along the way.

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The views expressed here are that of myself or the cited individual or firm and do not constitute a recommendation, solicitation, or offer by myself, D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

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