Three reasons beating the market is so difficult

I’ve tried to do it. My father before me, who was one savvy stockbroker, tried to do it. Perhaps you have tried to do it, too.

Most stock investors at one time or another have tried to “beat” the market because, well, we believe we can. Beating the market means your stock picks outperform the Standard & Poor’s 500 index, which is basically a proxy for the overall stock market.

The truth is that very few of us have the talent, discipline, analytical skills, knowledge or temperament to beat Mr. Market at his own game. About 80 percent of those who try — some four out of five — fail at it.

But that’s old news, and that statistic has been tossed around for years. I decided to dig a little deeper into why beating the market is so difficult.

So I contacted one of the few market experts who correctly predicted the housing implosion and derivative mess that almost took down the U.S. financial system. Barry Ritholtz, chief executive of Fusion IQ, a New York research and money management firm, told me investors face three formidable opponents when it comes to investing and beating the market. All are important, but pay special attention to No. 3. (more)