Final answer:
Jim's consistent losses despite following GJ's share tips point to the difficulty of outguessing the market, a concept central to market efficiency theories. The majority of financial investors and professional fund managers also struggle to consistently beat the market, reinforcing the idea that market movements are unpredictable and not easily outperformed.
Step-by-step explanation:
The fact that Jim has consistently lost 20% per annum over the last five years by following GJ's share tips suggests that predicting market movements is extremely challenging, even for those who profess expertise. This is an illustration of the concept of market efficiency, where it is believed that available information is already reflected in stock prices, making it difficult to achieve consistent above-market returns. The failure to outguess the market is a common experience; indeed, historical data show that many professional fund managers also struggle with this.
Despite some financial investors having success in short-term periods, the vast majority are unable to consistently outperform the market. Most mutual funds attempting to pick winning stocks often fare worse than the market average. This indicates that becoming rich by stock picking is more a matter of luck than skill and plays into the theory that stocks follow a 'random walk,' whereby past movements do not reliably predict future performance.
For the average investor perusing business pages and following online tips, there's a clear message: attempting to beat the market is fraught with risk, and the likelihood of doing better than investment professionals is quite low. This aligns with the concept that in an efficient market, all known information is already priced into stocks, rendering consistent outperformance highly improbable for any investor.