Because the market processes all information at a speed that makes regularly beating the market impossible; and literally every investor on earth is looking for an “edge” at the same time. The stock market is “efficient” from the standpoint of, any profit you can make by trading on new information vaporizes in a nanosecond.
I use quotes around the word “efficient” because I’m NOT implying the stock market is efficient from a Marxist or resource allocation perspective. Just that today’s stock prices reflect the sum of all information that we have about a given stock up to the moment.
The outperformance of index funds is largely due to their lower expenses and the fact that money managers, just by trying to beat the market, often do the wrong thing.
okay explain why
Because the market processes all information at a speed that makes regularly beating the market impossible; and literally every investor on earth is looking for an “edge” at the same time. The stock market is “efficient” from the standpoint of, any profit you can make by trading on new information vaporizes in a nanosecond.
I use quotes around the word “efficient” because I’m NOT implying the stock market is efficient from a Marxist or resource allocation perspective. Just that today’s stock prices reflect the sum of all information that we have about a given stock up to the moment.
The outperformance of index funds is largely due to their lower expenses and the fact that money managers, just by trying to beat the market, often do the wrong thing.
Efficiency should be a thing to another thing, Efficiency by itself just kinda floats as a concept (does this land? I just woke up)
I think what you are getting at is “efficiency must be in context” or without some specific performance criteria it is an empty idea
Something like that, I hear the market is efficient without any qualifiers a lot