Lesson 41 Traditional Active Managers Are a Waste of Money
Individual stock selection and market timing decisions are a highly effective way to increase costs, reduce returns, and increase risk.
Market Efficiency
Markets are efficient, which means that security prices quickly reflect all available news and information about a company. A few million reasonably well-informed players reach a consensus value for the stock almost instantly. This does not mean that the stocks are “correctly” priced, only that playing the stock market is a very hard game to win, if you think that you can consistently pick winners or spot losers often enough to overcome the costs of trading and doing the research. The implication of this is that hiring ...
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