I'm only beginning to learn how to invest so bear with me. But as I understand it, the market is already priced in based on known information to account for future variance and growth. So why are penny stocks, for instance, bad? If they were bad, shouldn't the price drop until the money needed to by the stock is worth the potential gains? Similarly, how can companies listed in spy be good? If they provided such consistent returns, wouldn't the prices of the stocks rise until their consistent gains are no longer worth the minute risk they pose?
In the end, if I just buy random stocks, shouldn't my expected growth be roughly the same as SPY? If there was some easy rule of thumb for investing, shouldn't enough people do it to jack the prices up until it isn't much better than investing randomly?
The only reason I can think of that this isn't the case is that there are people addicted to gambling who buy high risk stocks, and thats why stuff like penny stocks are bad stocks. But thats kind of silly considering the amount of people who invest.