Final answer:
Investors tend to do only as well as or just slightly better than the market due to market efficiency and diversification. Cognitive biases can also contribute to investors' inability to consistently outperform the market.
Step-by-step explanation:
Investors tend to do only as well as or just slightly better than the market due to Market efficiency. Market efficiency refers to the idea that financial markets are generally efficient and incorporate all available information into stock prices, making it difficult for investors to consistently outperform the market. This means that even though some investors may have periods of success, the majority of investors will not be able to consistently beat the market average.
One of the reasons for this is Diversification. Investing in a wide range of stocks or bonds helps to reduce the risk associated with investing in a single company. By spreading investments across different companies or assets, diversification helps to minimize the impact of poor performance by any individual investment.
Cognitive bias, such as overconfidence or the Dunning-Kruger effect, can also contribute to investors' inability to consistently outperform the market.