February 3, 2015

What is the efficient market hypothesis and why should you care?

3 thoughts on “February 3, 2015”

  1. Brennan Haag says:

    Its a theory that states that it is impossible to beat the market because stocks always sell at their current value. It claims that it is impossible to beat the market because you can’t select undervalued stocks. You should care because you don’t need beat the market, you just need to be well diversified. One of the best ways to do this is to own no load mutual index funds. You can own an entire economy for a very low price.

  2. Garrett Haag says:

    It is the theory that stocks are already priced at what they should be. You will not be able to pick a stock that will perform better based on current known data. Unknown data is what moves the market and if you dont know the information you can’t act on it. The insiders get the information first and computers trade on that information the millisecond that it comes out. You cant beat the computers at what they are made for. You are best of buying index funds and holding the market as a whole for a long period of time.

  3. Mike Finley says:

    Nicely done, gentlemen. Let’s recap.

    (1) The market reflects all information that is currently known.

    (2) That includes inside information, which is illegal and known to only a few.

    (3) What will move the market up or down from there is new information that is not known.

    (4) Believing you can beat others (bet on future moves either up or down in the market) to that new unknown information is delusional and should be avoided at all cost.

    (5) This is why we buy all markets all over the world with inexpensive index funds. Little by little, this will make you a very successful investor. Awake to the possibilities!

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