What we usually call respecting market rules is about respecting what?

1️⃣ God does not like people who think they are smarter than Him.

Similarly, the market does not like people who are self-righteous; it will drive wealth away from those who are clever by half.

2️⃣ The market is a large system,

most people cannot consistently outperform the market over the long term because most timing attempts will miss key upswings; most confidence will turn into transaction costs; most short-term successes cannot demonstrate long-term ability.

3️⃣ The returns on active investing are extremely low;

theoretically, the overall returns of all active investors combined cannot exceed that of the market; in practice, further deductions for transaction costs mean that the returns on active investing are even lower.

Here, Teacher Wu Jun has a very interesting number that is clear at a glance:

Assuming the overall return of a market in one year is 7.2% (this is indeed the average return of the US stock market over the past thirty years).

Half of the people are passive investors, buying index funds and doing nothing. Their overall return is basically the market average return: 7.2%.

The other half are active investors, including fund managers, institutions, and retail investors. They study companies daily, judge macroeconomic trends, analyze charts, make trades, and try to buy low and sell high.

But the problem is: if the total market return is 7.2% and passive investors have already taken 7.2%, then the active investors as a group can only get 7.2% overall.

It is impossible for all active investors to outperform the market.

Because the extra profit you make must come from the portion that another active investor earns less or loses.

So active investing is essentially not about "everyone outpacing the market," but rather:

a group of people competing with each other, ultimately returning to the market average.

If we also consider transaction fees, stamp duty, management fees, research costs, time costs, emotional costs, and the error costs brought about by frequent operations.

Speaking of institutions, in 2025, among active funds in the US large-cap market, 79% of large-cap active funds underperformed the S&P 500; extending it to 10 years, nearly 90% of US large-cap active funds underperformed the S&P 500.

Do not always think you are very capable, or that you are one of the lucky ones, but rather humble yourself to the ground and think deeply.

Our opponents are not the market itself, but rather: the smartest group of people in the entire market, our own transaction costs, our own emotions, and that part of ourselves that always feels "I understand more than others."

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