What does the monkey story on stock market actually mean?

Question

Hope you are aware of that story..

Answer 1

Thought about it more and the lesson is there is no such thing as easy money.

Answer 2

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Answer 3

Never heard it.

Answer 4

Once upon a time a man told a small village, “I will buy monkeys for $10 each.”

Since there were many monkeys in the forest, the villagers caught them and sold them to the man.

As the supply of monkeys diminished, the villagers’ efforts slowed, so the man offered them $20 each.

They renewed their efforts but the supply of monkeys diminished further, so he increased his price to $25.

Soon no one could even find a monkey in the forest.

The man increased his price to $50, but announced, “Since I must go to the city on business, I authorize my assistant to buy monkeys on my behalf.”

As soon as his boss was gone, the assistant told the villagers, “My boss has collected lots of monkeys. I’ll sell them to you for $35 and then, when he returns, you can sell them to him for $50.”

The villagers rounded up all the money they could and bought as many monkeys as possible. Then they had monkeys everywhere…

… but they never saw the man or his assistant again.

And now you understand the workings of the stock market!

Answer 5

I assume you are talking about the "story" that a monkey throwing darts at list of stocks can do as well as a professional  mutual fund manager. On average, mutual funds underperform stock market averages, and that implies you shouldn't pay institutions  (e.g. mutual funds) to invest for you.

The fallacy is that the reason that they do worse than average is because they ARE the average. The majority of stocks are owned by mutual funds and other institutions so you would expect the average institution to do average. The reason they do worse is because they charge fees that cut into the returns.

Stock index funds operate on the premise that by following the average and charging minimal fees, they can outperform most managed mutual funds (but they still can't outperform the average).

How you invest depends on how much experience you have investing.

A person with no experience should aim for average return and reduced risk. He will do best by investing in stock index mutual funds. These funds have the highest average return and the lowest risk.

A person with some experience perhaps understands market trends but should stay away from selecting individual stocks. He should aim for better than average returns and reduced risk by investing in both  managed mutual funds based on their  fees, holdings, and managers, and stock index funds.

A person with a lot of experience should aim for the highest returns and reduced risk. We should invest in a mix of individual companies, managed mutual funds, and stock index funds.

Individual investors should stay away from options, commodities, and currencies. They are too risky and the average non-professional loses money in these markets.

Answer 6

Do you mean the old store about where a monkey throws darts at a dart board to pick stocks?

This gets a lot of press, and makes fund of the Street. But in reality, in the short run random market movements are possible. Long term one needs to explore basic fundamental analysis - such as - is the company making money?