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Efficient Markets - Picking Winners By Past Performance Thumbnail

Efficient Markets - Picking Winners By Past Performance

In the years between 2009 and 2019, if you picked only the top 25% of funds in the previous 5 years, only 21% of global equity funds went on to continue to outperform, and 29% of global fixed income funds went on to outperform. That means if you simply picked the previous winner, expecting it to continue to be a winner in the future, you had basically a random outcome over the next 5 years.

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Introducing Efficient Markets Thumbnail

Introducing Efficient Markets

In this video I introduce the concept of efficient markets using an example from when I was a kid - yard sales! The efficient markets theory (Efficient Market Hypothesis), is one of the most important ideas in all of finance. Once you can grasp the idea that markets are a very efficient pricing machine, it unlocks the answer to a lot of other important questions: 1) Why do stocks return more than bonds? 2) Why do professional investment managers struggle to beat plain old index funds? 3) Why should we diversify vs. own a small subset of stocks or a concentrated portfolio? 4) How do I pick an investment strategy where I can just invest and relax? I will discuss these questions and more in future videos. I hope you enjoy this video. Leave comments, feedback, and suggestions below. Thanks, Mark

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