Why Investors Shouldn’t Listen to Out-of-Touch-with-Reality Theorists
The efficient market theory says that you can’t really beat the market because the market already has all the information available baked into the cake. So why bother? If this were true Warren Buffet, George Soros, Peter Lynch, and John Templeton would never have become billionaires. And interestingly each of these men made their fortunes directly betting against the efficient market theory.
Buffet, Lynch and Templeton were value investors looking for value where the market saw none and then waiting until the market came to its senses and Soros looked at broad trends and then made huge bets on unexpected events. From 1973 through the late 1980s, he ran his own hedge fund, often racking up returns of more than 30% per year and twice posting annual returns of more than 100% while the overall market averaged 10%. According to Investopedia, Soros “believed that financial markets can best be described as chaotic.” Quite the opposite of an efficient market.
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