(Video: Market coach Doug Hirschhorn, PhD, discusses athletes, hedge fund traders and gaining an edge.)
There are two things I love most in life: trading and baseball. Historically, peak performance in baseball involved finding something that gave players an edge over their opponent. Some used amphetamines. Others thought steroids gave them the edge.
Maybe that's what gave some players the ability to hit monster home runs. And while there may be a lot of gray areas and there haven't been any firm convictions that have come down, there is suspicion about what goes on.
Now look insider trading. Insider trading is kind of the trading world's version of steroids. Look at some of these hedge funds, these banks. What gives them an edge? How are they outperforming the markets?
At the end of the day, I think it's somewhat naive of us to believe steroids haven't been in sports for a long time. It's also naive to think information that wasn't publicly available didn't exist in the trading world.
That doesn't mean the world's corrupt. It doesn't mean Wall Street's going to fall apart. What it does mean is that you have to look at things objectively, analyze the situation, and find your own edge. To draw conclusions the whole system is awful and bankrupt and there's no way to fix it misses the point.
Think better, invest smarter.