The Kentucky Derby is, without a doubt, the most exciting horse racing event of the year. Millions of people who don't even watch horse racing pay attention to it, and it's featured all over the news. With all the coverage and excitement surrounding the race, it may be tempting to place a bet on it. Heck, even Jessica Simpson won a few dollars betting on it a few years ago on an episode of her show The Newlyweds (Sadly, I lost a pretty penny betting that their marriage would last more than five years).

But here's the best advice I can give you regarding the Derby: Don't bet on it. As the most-watched race of the year, you won't have any edge -- there's too many other experts watching it. In his book Picking Winners, horse-betting expert Andy Beyer advises readers to "Only go to tracks where there aren't a lot of good players so you can clean up."

What does this have to do with investing? Following Beyer's logic, it is also unwise to invest in stocks like ExxonMobil Corp. (NYSE: XOM), Goldman Sachs Group (NYSE: GS), and Wal-Mart Stores (NYSE: WMT). There are simply too many good players handicapping these stocks for us to be able to find good deals. Remember: In horse racing, the object is not to bet on the horse most likely to win: That will nearly always be the favorite. The object is to bet on the horse that offers the best risk/reward ratio -- the horse that has a better chance at winning than its odds would indicate. This is a market inefficiency, and it's more likely to be found in small-caps or small tracks than big-caps or big tracks.