Apparently, there are 2 camp of investors exists in the stock market. On the one hand, there are those who believe that the markets are inefficient and information regarding individual stocks is incomplete or misunderstood. For those individual investors who think differently than the rest, they are able to make more money from the market over the long run by picking better investments. This group of investors who call themselves the value investors.
On the other hand, there’s another group of investors who believe that the markets are for the most part efficient. Especially, in this digital modernize, most relevant information about any given stock in the stock market is pretty much known by the market as a whole.
As what Eugene Fama 2014 Noble prize winner in economics have mention below
“In an efficient market, at any point in time, the actual price of a security will be a good estimate of its intrinsic value”
Therefore, in reference to the efficient market theory, individuals have little chance of consistently “beating” the market through superior security selection.
That’s why Warren Buffett finds it more and more difficult to beat the market, comparing his past historical investment till date. Because the era he started investing is totally different from now & going forward, it will be even tougher.
Since it’s difficult and almost impossible to gain an advantage through better research or analysis of individual securities, the idea is that investors shouldn’t even try to pick their way to success.
Apparently, those of us including myself are still picking individual stocks rather than going for market return. Is it because we are enjoying what we are doing now?