Dollars and Jens
Friday, December 21, 2007
Re: efficient markets
Just to add something, I don't have quite the belief in efficient markets that these guys have, but I share their faith that the best thing a typical individual investor can do with his or her money is an index fund. Or, at any rate, something diversified with low expenses.
The main exception, I'd say, is if you enjoy stock-picking. Don't buy Enron or Global Crossing or whatever because your broker told you to, but if you've done some research and really believe that internet stocks are underpriced (or going to go up, anyway), and you've kept in mind that important industries don't always make good investments (sometimes all of the surplus goes to the consumer) and that great companies often have great expectations already built into their stock prices, and you want to buy, go ahead. But have realistic expectations. If you think you have found an investment with absolutely certain 50% annual returns, you should reconsider the odds of your analysis being absolutely certainly correct. And don't spend your winnings before the roulette wheel stops.