For investors and their advisers trying to beat the market or find ‘alpha’ this provides additional proof that it is really mission impossible. Many advisors believe that they bring value to clients by making prediction, picking under priced stocks. This is totally false and will cause investors to lose money unnecessarily. They would be better served by utulizing a prudent process and remain disciplined to that process. Advisers providing this type of guidance brings value to the client relationship. Selling return only increases client turnover and decreases public trust.

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The market for stocks and bonds takes into consideration all publicly available information and instantly incorporates that information into the price. This irrefutable fact has profound ramifications. Think about how most individual investors make investment decisions. They trade on their own using research tools provided by discount brokers (or worse, relying on technical charts with purported predictive value). They rely on analyst reports and the recommendations of their brokers or advisers. These “financial experts” are all too willing to pick the next “fund manager of the year,” identify “mispriced” stocks, select high yielding bonds and predict the direction of the markets.

Relying on this advice, instead of looking at the market and recognizing the current price is a fair price, which reflects current and forecasted news, is the most fundamental error made by investors. The likelihood of identifying mispricings and profiting from them is 50 percent, before costs and taxes.

This is not an intelligent way to invest.

Another example and good advice on predicting the future. No one can consistently predict the future. The best alternative for all investors is to own equities, globally diversify and rebalance. This prudent process will lead to a successful investment experience.

Please comment or call to discuss how this affects you.