Of course, markets aren't perfectly efficient, and they do make mistakes. Nintendo's stock price adventures following the release of Pokemon Go is an interesting recent example.
I just wanted to point out that technically there are sure ways to beat the market if you have access to large amounts of data that the average investor doesnt have access to. One example could be insider trading (like from the show "billions" which is a real thing that really happens). However, another (legal) example could be using big data. There are companies who use very powerful computers to analyze tons of data, everything from flight delays, traffic patters, weather forecasts, news outlets, google searches, people's social media accounts, and a lot of economic predictors and use powerful algorithms that process this data and find correlations and patterns in the market which they exploit to make money. It is mathematically possible to beat the market this way because most people in the market wont have access to such large data sets and wont be able to exploit these anomalies. This is how jim simmons made his money.
What role do financial engineers which have come up in recent decades play in this? I mean I never understand what they say except that they use a lot of statistics and modelling.
Buffett and Munger disagree with this theory. Some say, oh, they have more information than others. When they first started, they did not have this information, and they still beat the market. The market is irrational because people do not always behave rationally.
@ H.A. S. Thank you for sharing. Watch this video: th-cam.com/video/UZNqLWe5o2Q/w-d-xo.html Warren Buffett & Charlie Munger on the "Efficient Market Theory"
Everyone pricing known information in the market has different time horizons. In other words, everyone discounts future cash flows to present value, but with their own subjective discount rate, based on their own investing time horizon.
Love the video! There are 2 ways to beat the market by a long shot. 1- learn the skills of day trading. Very hard and it takes time and patience. Or 2- Get into resource investing and buy he stocks when the commodities are at least at a 3-5 year low. The second strategy takes guts, but I've made over 300% on my money doing that this year.
Have you read the book mentioned in this video? It explain why trading is not the best solution (one of the factor being the transaction fee for high frequency trading)
Access to INFORMATION does not equal effective or correct use of information. EMH assumes that every market participant has the same abilities or desire to use the available information.
Iv left the market in the dust, im baffled with this adage. Its an ego boost to me if the rest of the world really cant beat the market, i absolutely destroy it.
It doesn't. Stock Markets almost always grow. When they don't, they are in a recession, or a depression. It almost always grows, because the body of knowledge is growing, as is the population.
Well the efficient market theory has been demoted to efficient market hypothesis. Had one invested in Facebook 5 years ago, its return is higher than the average market. Had one give all her money to Berthshire Hathway 10 years ago, one would have return higher than the market. Efficient market hypothesis is taking what physicists have produced and trying to find examples to justify because it is like the word "blockchain". You cannot go wrong if you ride the buzz word of the time or the theory of the time.
The idea you cant beat the market is like the idea the betting odds in sports will always go to the winner. People, in fact, don't always know the facts generally, and some CAN make correct predictions. It's why Soros is a billionaire. But, sure, it's not common to be able to do that. I also think it's wrong to think available information is known information. As a researcher, I often find publicly available information that is unknown because people aren't disposed to look it up. I don't mean to imply there isn't common sense or you can be godlike in you knowledge, only that the knowledge dynamic isn't exactly as you describe.
Completely wrong! While it's true that it's not reasonably possible to get rich quick in the stock market, it is extraordinarily easy to beat the market. The secret is to buy dividend stocks and/or share buy-back stocks during market corrections, while avoiding obvious losers that have major financial problems. You won't get rich quick with this strategy, and you will have losers from time to time, and you will occasionally not beat the market. But the gains over 30 years will be at least triple the gains produced by the market/index funds.
Do a little research buddy. It's very hard to find a period of time in which companies profitable enough to consistently produce dividends underperformed the market for more than a year, or a 10 year period in which they fail to over perform the market.
Truths, Taboos and Theories The vast majority of people who pick stocks for a living have a conflict of interest when managing other peoples money. They make more money doing things that they know are wrong than by doing what's right. The proof is undeniable. The "stock pickers" who follow what Warren Buffet does, or follow a system based on Warren Buffet's writings about his strategies, regularly out perform the market. The only reason most don't follow the lead of Warren Buffet is because it is a get-rich-slow scheme. Those who want to get rich quick, which is most, charge fees for picking stocks using other peoples money; these folks get richer by losing other peoples money, not by making investing other peoples money soundly.
100% sure way to beat to beat the market: Buy individual stocks to match the index, open a SBL account, and lend out your stocks to your broker. You'll consistently beat the market but by a small fraction of a percent from the interest earn by lending out your stocks but you may need to actively rebalance your portfolio every year.
Check out our free personal finance unit plan, Career Readiness and Budgeting for the Age of AI: mru.io/xlg
Of course, markets aren't perfectly efficient, and they do make mistakes. Nintendo's stock price adventures following the release of Pokemon Go is an interesting recent example.
I just wanted to point out that technically there are sure ways to beat the market if you have access to large amounts of data that the average investor doesnt have access to. One example could be insider trading (like from the show "billions" which is a real thing that really happens). However, another (legal) example could be using big data. There are companies who use very powerful computers to analyze tons of data, everything from flight delays, traffic patters, weather forecasts, news outlets, google searches, people's social media accounts, and a lot of economic predictors and use powerful algorithms that process this data and find correlations and patterns in the market which they exploit to make money. It is mathematically possible to beat the market this way because most people in the market wont have access to such large data sets and wont be able to exploit these anomalies. This is how jim simmons made his money.
What role do financial engineers which have come up in recent decades play in this? I mean I never understand what they say except that they use a lot of statistics and modelling.
Buffett and Munger disagree with this theory. Some say, oh, they have more information than others. When they first started, they did not have this information, and they still beat the market. The market is irrational because people do not always behave rationally.
@ H.A. S. Thank you for sharing. Watch this video:
th-cam.com/video/UZNqLWe5o2Q/w-d-xo.html
Warren Buffett & Charlie Munger on the "Efficient Market Theory"
Warren Buffett & Charlie Munger on the "Efficient Market Theory"
📺 th-cam.com/video/UZNqLWe5o2Q/w-d-xo.html
What a beneficial example you gave on "Morton-Thiokol"! Your works are appreciated.
Everyone pricing known information in the market has different time horizons. In other words, everyone discounts future cash flows to present value, but with their own subjective discount rate, based on their own investing time horizon.
in other words,,shouldn't we go for dividends?
Love the video! There are 2 ways to beat the market by a long shot. 1- learn the skills of day trading. Very hard and it takes time and patience. Or 2- Get into resource investing and buy he stocks when the commodities are at least at a 3-5 year low. The second strategy takes guts, but I've made over 300% on my money doing that this year.
+FreedomForceUSA what?
Have you read the book mentioned in this video? It explain why trading is not the best solution (one of the factor being the transaction fee for high frequency trading)
Access to INFORMATION does not equal effective or correct use of information. EMH assumes that every market participant has the same abilities or desire to use the available information.
Simply brilliant!
Iv left the market in the dust, im baffled with this adage. Its an ego boost to me if the rest of the world really cant beat the market, i absolutely destroy it.
can you talk about currencys when you can. and the currency crash people are predicting and why
The markets are not efficient. Some markets are highly ineffecient. Some are highly efficient
Wonderful presentation !
plz make a video on types of tax and tax rates in india
wrong, no such thing as predicx power about marketx, that was a fluke from earlier previous reports, also, no such thing as interesx or not
Why does stock market always grow?
It doesn't.
Stock Markets almost always grow. When they don't, they are in a recession, or a depression.
It almost always grows, because the body of knowledge is growing, as is the population.
its a never ending pyramid scheme
Bit by bit, I shall finish these videos! That is my goal, all of the videos, eventually. (I started at latest and am here)
What’s that dope music?
Well the efficient market theory has been demoted to efficient market hypothesis. Had one invested in Facebook 5 years ago, its return is higher than the average market. Had one give all her money to Berthshire Hathway 10 years ago, one would have return higher than the market.
Efficient market hypothesis is taking what physicists have produced and trying to find examples to justify because it is like the word "blockchain". You cannot go wrong if you ride the buzz word of the time or the theory of the time.
Well buffet hasn't beaten the s&p 500 in last 10 years, & he himself advices buy index fund...
What percent of these experts would successfully predict the market’s direction at least 2 out of the 3 years by simply flipping a coin?
The idea you cant beat the market is like the idea the betting odds in sports will always go to the winner. People, in fact, don't always know the facts generally, and some CAN make correct predictions. It's why Soros is a billionaire. But, sure, it's not common to be able to do that. I also think it's wrong to think available information is known information. As a researcher, I often find publicly available information that is unknown because people aren't disposed to look it up. I don't mean to imply there isn't common sense or you can be godlike in you knowledge, only that the knowledge dynamic isn't exactly as you describe.
Completely wrong!
While it's true that it's not reasonably possible to get rich quick in the stock market, it is extraordinarily easy to beat the market.
The secret is to buy dividend stocks and/or share buy-back stocks during market corrections, while avoiding obvious losers that have major financial problems.
You won't get rich quick with this strategy, and you will have losers from time to time, and you will occasionally not beat the market. But the gains over 30 years will be at least triple the gains produced by the market/index funds.
Do a little research buddy. It's very hard to find a period of time in which companies profitable enough to consistently produce dividends underperformed the market for more than a year, or a 10 year period in which they fail to over perform the market.
So.............. what are you trying to sell..........................................
I am selling the crazy idea that people should bother to think for themselves a little bit
Truths, Taboos and Theories The vast majority of people who pick stocks for a living have a conflict of interest when managing other peoples money. They make more money doing things that they know are wrong than by doing what's right.
The proof is undeniable. The "stock pickers" who follow what Warren Buffet does, or follow a system based on Warren Buffet's writings about his strategies, regularly out perform the market.
The only reason most don't follow the lead of Warren Buffet is because it is a get-rich-slow scheme. Those who want to get rich quick, which is most, charge fees for picking stocks using other peoples money; these folks get richer by losing other peoples money, not by making investing other peoples money soundly.
100% sure way to beat to beat the market: Buy individual stocks to match the index, open a SBL account, and lend out your stocks to your broker. You'll consistently beat the market but by a small fraction of a percent from the interest earn by lending out your stocks but you may need to actively rebalance your portfolio every year.
The market is irrational and highly emotional look at GME or AMC
Efficient Market Hypothesis
coronavirus
No, you cannot.