How to achieve above average results?

Disclaimer: Please note that all content and information in this blog are for educational and informational purposes only and should not be taken as professional investment advice.

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How to achieve above average results?

To achieve above average results, one needs to go above and beyond what the average does.

But you can also achieve above average results by avoiding average mistakes. Learn from the mistakes of others and avoid them. This way, you can avoid making the mistakes the average person makes, and in doing so, you can achieve above average results.

In short, above average results can be achieved by:

1. Going above and beyond

2. Avoiding average mistakes

How does this apply to investing?

In recent years, ETF investing, specifically US ETFs of the S&P 500 index have grown extremely popular. ETF investing is mainstream today. In other words, the average investor today would be achieving the returns of ETF, which is basically the market return. So if you want to achieve above results, you must outperform the market, which is difficult to consistently execute. As such, it would be easier to achieve above average results by avoiding average mistakes.

What exactly are average mistakes? In investing, the two most common (average) mistakes people make are:

1. Not staying invested 

2. Not investing at all

By avoiding these two common mistakes (i.e., invest and stay invested), you can achieve above average results. People tend to be eager to take profits early when they see gains. If you buy a well-diversified index, this should be the last thing to do because it destroys the powerful compounding effect of staying invested over time. By selling and taking profits early, you don't give time for your investments to compound. And the greatest gains from investing come not from taking profits early but from staying invested and letting your investment compound.

You can easily achieve above average results by simply investing and staying invested. And you can gain an even greater competitive advantage over others by deploying your capital as early as you can. Holding back and investing later on will reduce your investment horizon which is crucial for compounding. And definitely don't swing to the other extreme of investing all your capital at once at all time highs. But also avoid delaying your investment decision and plan. Take action as soon as possible and as soon as you can.

"The best time to invest is when you have money. This is because history suggests it is not timing which matters, but time." — Benjamin Graham

More on ETFs

Over US$1 trillion flowed into ETFs in 2025. This is unsurprising given that the US market rallied 24% in 2024. But did the record inflow into US ETFs cause the US rally, or did the US rally cause the record inflow into US ETFs?

It is a chicken or egg problem. We won't know for certain the cause of the rally. But it's certain both factors reinforce each other. A US rally will attract inflows into US ETFs, and inflows into US ETFs will naturally cause the market to rally.

It seems the US market has entered a stage where the self-reinforcing relationship between the market rally and ETFs inflow has entered a pretty vicious cycle, leading to a much stronger than expected market rally. This is partly fuelled by FOMO and partly by the recent AI boom.

Whether this rally is sustainable is unclear. But what's clear is that the US market is no longer as attractive as it used to be. Back in the day when ETFs were relatively new, the inflows into US market was much less compared to today. And so were the valuations (see below for S&P 500 P/E ratio chart), with the exceptions of bubbles like the 2000 dot com crash where equity prices skyrocketed.

With fewer investors in the US market in the past, assets were more moderately priced. Today, everyone is talking about ETFs and DCA-ing into the US market, with many heavily invested in the US market with some having 100% of their portfolios concentrated in the US. This is both a good and bad sign.

Good

- Signals strong interest and optimism in the US market which is crucial for more fund inflows that will sustain this rally.

- Signals greater financial literacy among investors as many are more aware of the different financial instruments and tools available, leading to a more efficient market.

Bad

- People invest without thinking twice. They invest because everyone else is doing so. People with little to no investing knowledge are dumping their savings in US ETFs. This will drive prices up, creating a potential bubble when prices stretch far beyond their fair valuations.

- People over-concentrate their assets in the US which can have devastating effects on their finances if the US market crashes, leading to a potentially large-scale panic sell-off by new investors who tend to be weaker holders. In the end, the big investors will benefit while the small investors lose out. This has happened throughout history and will continue to happen.

But the good news is that unlike companies, ETFs are self-cleansing. So naturally, the lousier underperforming companies will be weeded out and replaced by strong performing companies. This will naturally cause the US index to rise over the long term.

But the question is not whether the US market will continue rising. It most certainly will, barring black swan events like WWIII or a nuclear catastrophe. The question is whether the US market can provide above average returns like it did in the past century.

Hindsight is perfect sight. Looking back, it is easy for people to conclude that the US market was the best market to invest in, at least for the past century. But if you asked people back then a century ago, few would be certain which country would be the next superpower, or specifically, which country's economy and stock market will outperform the global average.

Likewise today, we won't know for certain that the US market will continue to provide above average returns over the next century as it did in the past.

If we want to achieve above average results, we need to make above average decisions, or at least avoid making mistakes which the majority make.

If everyone is investing in the US market, naturally, the average performance will converge to the index return. If you want to outperform it, you cannot invest in what everyone else is investing in.

This is not to say you cannot invest in the US market index, but you must invest with the awareness that the US may not achieve the same high and above average performance like it did historically.

You cannot expect the future to turn out similar to the past. Also, we cannot predict the future and therefore need to constantly make changes to our investment decisions and plans.

It is perfectly fine to invest in the US market, but you should not invest expecting it to outperform the global index. There is no guarantee that the US will yield above average returns as it did in the past.

As such, people may decide to invest in a globally diversified index to mitigate this risk. There's nothing wrong with that, except you are accepting the average return. If you are satisfied with that, the global index is your best choice. But if you desire to achieve above average results, you need to look beyond index investing.

Some advocate stock picking. But it is extremely difficult to ensure your stock picking consistently outperforms the market. Instead, I believe country picking may be a safer and less risky decision. Buying the index of a country is better than picking individual stocks. When you invest in a country's ETF, you are betting the country will perform well.

Closing Remarks

From a valuation perspective, the US market valuation is definitely not low. Many US stocks are valued at a rich premium. Therefore the US market as a whole is not cheap and likely highly valued. And historically, investing during periods of high valuation does not produce above average results. 

Investing in periods of high valuation is definitely better than not investing at all, but it is unlikely to lead to above average results. Instead, you need to either invest in periods of low valuations or in markets that are undervalued. 

The prime example is China. Everyone knows China is undervalued yet no one is investing in it. People are consciously aware of the cheap valuations but are yet reluctant to invest. Why? Fear.

Fear drives people to act irrationally. To avoid buying something that is undervalued in favour for something that is overvalued is irrational.

While the US and Chinese market may not be a perfect illustration of this phenomenon, it is true to some extent.

People are avoiding China like a plague despite knowing that many Chinese companies are undervalued. And they rationalise that it is because of the political risk and uncertainty that Chinese equities are trading at a steep discount and hence they avoid Chinese equities altogether.

This reasoning is not completely untrue. But the question is whether the political risk of China justifies the steep discount in Chinese equities. This is where you need to make a personal judgment. Many believe it is justified and therefore believe Chinese equities are fairly valued given the risk, while some believe the market is over-discounted for this risk. Whichever view you take, it is important to remember that the best buying opportunities happen not when everything is perfectly rosy, but when there is fear, uncertainty and panic.

Food for Thought

Remember the March 2020 crash triggered by the pandemic, or the 2022 bear market triggered by geopolitical tensions and inflationary risks? These were times where there wasn't much good news. There was a lot of fear and bad news out there. As such, markets overreacted to these bad news and offered many equities at heavy discounts. These great buying opportunities (as seen in hindsight) happened because of fear and panic.

In fact, the best way to tell whether it is a great time to invest is by the level of fear and panic in the market. The greater the fear, the more likely you are to find greater discounts. There is a direct correlation between fear and bargain buys. Bargain buys in the market happen because of fear. 

Likewise today, when everyone is saying China is un-investable because of the political risk, would you rather converge to the mean by doing what everyone else is doing — ignoring Chinese equities in favour of US equities, or would you rather be a contrarian and do the exact opposite of what everyone is doing?

In the short term, you may look foolish. But in the long term, you will not, because as the markets have shown, what is undervalued will one day be fairly valued and what is overvalued will likewise one day be fairly valued. When the day comes, you will be richly rewarded. It doesn't matter whether you look foolish, what matters is whether you make returns and that you are satisfied with your returns.

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Disclaimer:

The content and information provided on this blog is solely for educational and informational purposes, and should not be construed as financial advice. The accuracy or completeness of the content and information provided in the blog cannot be guaranteed. Before making any investment decisions, it is important for readers to research and carry out independent verification of the information provided, or consult with a qualified financial professional. No warranty and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of actions taken based on the ideas or information found in this blog.

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