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.
Thanks for watching!