What sort of competition do I face as an investor?
The market is an effective information-processing machine. Millions of market participants buy and sell securities every day and the real-time information they bring helps set prices.
This means competition is stiff and trying to outguess market prices is difficult for anyone, even professional money managers. This is good news for investors though. Rather than basing an investment strategy on trying to find securities that are priced “incorrectly,” investors can instead rely on the information in market prices to help build their portfolios.
Do you have to outsmart the market to be a successful investor?
When you try to outwit the market, you compete against the collective knowledge of all investors. By harnessing the market’s power, you put their knowledge to work in your portfolio.
Will making frequent changes to my portfolio help me achieve investment success?
It’s tough, if not impossible, to know which market segments will outperform from period to period.
Accordingly, it’s better to avoid market timing calls and other unnecessary changes that can be costly. Allowing emotions or opinions about short-term market conditions to impact long-term investment decisions can lead to disappointing results.