Don’t Compete To Beat The Market

There’s a lesson to be learned from amusement parks and carnival games. The biggest crowds are around the games that offer the biggest prizes – the giant bears, the Xbox consoles, blah blah blah.

You know the games I’m talking about… Try to land a ping pong ball in a cup in the middle of hundreds of cups? Try to fit a ring around the neck of a bottle? Good luck with that.

Hardly anyone ever wins these games, but people can’t resist the chance to win big. There’s always that one lucky person out of hundreds in a day that gives everyone else hope. Everyone in the park sees this guy or girl walking around with this giant teddy bear they can hardly keep from touching the ground, and it’s the perfect advertisement for the amusement park to keep raking in the bucks from those who think they can beat the house. The reality is, the odds are not in your favor with these types of games.

I’m not opposed to all carnival games.

Do you know what games I like? The sports games. Throw a football through a tire? That’s something I have better odds at winning because of my experience. The prizes start smaller, but you can trade them up for bigger prizes as you win more games. If you have the skills, you can win that big prize without shelling out a ton of money.

There’s an analogy here in the world of investing. Most people are trying to hit the home run with stock investing. They’re fighting against big odds. Sure, an investor will get lucky once in a while, but for the most part, very few people beat the market, just like very few people beat the house at the amusement park.

Even the pros fail to beat the market, so what hope does the average investor have?

According to a 2020 report, over a 15-year period, nearly 90% of actively managed investment funds failed to beat the market. These people aren’t slouches either. Portfolio managers are often Ivy League-educated investors, analysts, and prognosticators who spend their entire workday attempting to outperform the stock market. 90% of them fail.  

In the world of investments, just like with carnival games, I prefer assets I have more control of, where I can put my experience and skills to use.

With commercial real estate (“CRE”), the goal isn’t to “beat the market” because we aren’t interested in playing in the market. Instead of the stock market game that attracts all the crowds, we prefer the CRE game, where the payoffs may be slow for some people’s tastes, but they’re steady. And by reinvesting these gains, you can keep trading in for a bigger and bigger prize.  

Ask yourself this:  What is your big prize?  If your big prize is to achieve financial independence so you can retire early and enjoy your family and time while you’re young, then CRE is the surest path to that prize.

Why keep throwing ping pong balls at the Wall Street cups where you’ll likely never win that big prize when you can be investing in CRE and work your way up to that big prize through reliable and consistent gains?

As I alluded to earlier, with CRE, you, the investor, have more control over the outcome of your investment.

  • You’re not leaving everything to chance like with the stock market.
  • You don’t have to worry about whether events on foreign soil or bonehead moves by politicians are going to sink your portfolio.
  • You don’t care what’s going on on social media because you’ve taken your portfolio out of the hands of the mobs by allocating to an illiquid asset insulated from broader market volatility.

The most important advantage of CRE is you can force rent improvements and appreciation through proactive moves.

With CRE, it’s all about the bottom line. We’re not competing to beat the market; we’re focused on income and long-term growth. We’re not concerned about being just above average.

As CRE investors, we’re focused on winning that big prize through small victories. What do I mean? Winning in CRE is about the little value-added victories we can compile with an asset.

If we can give ourselves an advantage by networking to find off-market value properties, then properly vet them and conduct thorough due diligence, we put ourselves in the driver’s seat right off the block if we can purchase a property at a value price.

Then, suppose we can make improvements and make operational changes to increase income and reduce vacancies. In that case, we move closer and closer to our prize as we bank more and more income and appreciation that we can reinvest.  

Don’t Compete To Beat The Market!

If you ignore the market and focus on something that will generate consistent income and appreciation, history has proven that you will not only beat the market, but you will significantly outperform it if you do the little things or rely on experts who do the little things.


IMG_3070 copy
Logan Freeman

Building generational wealth with alternative investments