You Can Be A Stock Market Genius

Chapter 1: Follow The Yellow Brick Road--Then Hang A Right

August 23, 2025

• Academic teaching of the efficient-market ("random walk") theory has convinced large swaths of current and would-be investors that it's not possible to outperform the market averages over long periods of time. So, the academic teachings of professors typically focus on how to pick and assemble diversified stock portfolios or lead prospective investors to not even try generating excess returns. Joel cites a professional money manager who clearly debunked the efficient-market theory, having exceeded S&P 500 returns by between 2 and 3% over 10 years. A phenomenal record. 

Excess annual yield of 2-3% seems inconsequential but when compounded for 20 years, an extra 2% per year creates a 50% larger return over the same timeframe. The wonders of compounding are often repeated when consuming investment content, but without visualizing the effects of compounding, I've long under-appreciated its power. So I put together the below table to supplement the widely-stated facts on compounding.