Mark Sutcliffe September 10, 2015 Starting Out Rookie Mistakes According to this story, excitement is building for the release of Conor McDavid’s first hockey card as an NHL player. McDavid, as I’m sure you know, is expected to become one of those once-a-generation hockey superstars, like Sidney Crosby or Mario Lemieux. The prospective value of his “rookie card” is compared to that of Wayne Gretzky. The story also mentions a rare 1909 Honus Wagner baseball card that once sold for $2.8 million. But here’s the problem with counting on McDavid’s card to one day be worth thousands or millions of dollars: everyone already expects him to be a big star. The reason some cards end up being worth a lot is because nobody anticipates them being of great value in the future, usually because the player is a surprising star, not a highly touted prospect. Otherwise no one would throw away the card, creating the scarcity required to drive up the price. In the case of both the 1909 baseball card and Gretzky’s rookie card (which I’m pretty sure I had when I was a kid), nobody expected the boom in the value of trading cards that happened in the 1990s. To have known that the Gretzky card would one day be worth a lot, you’d have to have predicted not only that he would become the greatest player of all time, but that unexpected boom in trading-card value. If that was easy to do, more people would have hung on to the cards when they had them and they wouldn’t be in such short supply. Now that there are built-in expectations around both the value of cards and the stardom of McDavid, it’s impossible to replicate the Gretzky outcome. Likewise, commonly held expectations and knowledge are built into the market price of every stock. So if you think you can make a lot of money picking stocks – beating the market instead of getting the returns of the overall market – ask yourself: what is it that you’re predicting will happen in the future that the person selling you the stock – and everyone else in the market – doesn’t know? Share: Facebook Twitter LinkedIn Email IIROC AdvisorReport
Personal Wealth Mark Sutcliffe Beat the market? Most mutual funds don’t even meet the market Apr 26, 2017 Personal Wealth