Final answer:
A financial investor cannot ensure high capital gains by merely investing in high-profit companies because past performance does not predict future results and current stock prices already reflect known information. Over time, picking stocks to outperform the market often results in underperforming the market average, making index funds a potentially more stable option.
Step-by-step explanation:
A financial investor in stocks cannot earn high capital gains simply by buying companies with a demonstrated record of high profits for several reasons. First, past performance does not guarantee future results, as the stock market is influenced by a wide array of unpredictable economic factors that may impact a company's future profitability. Additionally, stock prices already factor in existing information, including a company's profit history, and the potential for large future gains may be limited if the stock is already accurately priced. While blue-chip stocks are considered stable investments, they do not necessarily guarantee high returns.
Furthermore, over time, it has been observed that a significant portion of mutual funds attempting to select stocks that will outperform the market average end up with returns worse than the market average. This suggests that the success rate of predicting which stocks will produce high returns is not very high, even for professional investors. Thus, investing in an index fund, which aims to mimic the market’s overall performance, may be a more consistent approach for an average investor to participate in market gains.